Eastwood Retirement Pty Ltd v Joseph Finance and Investment Pty Ltd

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S EAPCI 2024 0015

EASTWOOD RETIREMENT PTY LTD ACN 130 786 195 (AS TRUSTEE FOR THE EASTWOOD RETIREMENT UNIT TRUST)	Applicant
v
JOSEPH FINANCE AND INVESTMENT PTY LTD ACN 153 729 125 (AS TRUSTEE FOR THE LIFESTYLE INVESTMENT UNIT TRUST)	Respondent

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JUDGES:	BEACH, ORR JJA and MATTHEWS AJA
WHERE HELD:	Melbourne
DATE OF HEARING:	21 February 2025
DATE OF JUDGMENT:	12 March 2025
MEDIUM NEUTRAL CITATION:	[2025] VSCA 30
JUDGMENT APPEALED FROM:	[2023] VSC 731 (Croft J)

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DAMAGES – Quantification of damages for loss of opportunity arising from breach of contract – Application for leave to appeal – Trial judge held that the applicant breached clauses of an option deed for the purchase of a retirement business – Trial judge awarded damages for loss of opportunity based on the value of the business as at September 2023 less the price payable in accordance with option deed had purchase been completed in 2020 – Where undisputed evidence that the respondent required financing to complete the purchase – Whether trial judge erred in not accounting for costs attaching to potential loans in the form of interest from 2020 to 2023 – Whether 10 per cent discount based on Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 applied by trial judge was inadequate to account for the risk that respondent would not complete purchase – Principles for appellate review of level of Sellars discount the same as for appellate review of discretionary decisions – Leave to appeal refused.

McCartney v Orica Investments Pty Ltd [2011] NSWCA 337; Maritime Union of Australia v Fair Work Commission [2015] FCAFC 120; Bennett v Estate of Talacko [2020] VSCA 99; House v The King (1936) 55 CLR 499, applied.

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Counsel
Applicant:		Mr PH Solomon KC with Mr MQ Nguyen
Respondent:		Mr J Evans KC with Mr A Silver
Solicitors
Applicant:	HWL Ebsworth Lawyers
Respondent:	Madgwicks

TABLE OF CONTENTS

Introduction

The trial judgment

The application for leave to appeal

Proposed Ground 1

The proceeding at first instance

The trial judge’s consideration of the issue

Eastwood’s submissions on appeal

Joseph’s submissions on appeal

Consideration

Proposed Ground 2

The proceeding at first instance

The trial judge’s consideration of the issue

Eastwood’s submissions on appeal

Joseph’s submissions on appeal

Consideration

Conclusion

BEACH JA
ORR JA
MATTHEWS AJA:

Introduction

The applicant, Eastwood Retirement Pty Ltd (‘Eastwood’), is the registered proprietor of land situated at 20 Evergreen Way, Eastwood, Victoria (the ‘Land’) and the trustee of the Eastwood Retirement Unit Trust (‘ERUT’). Eastwood acquired the Land with the intention of developing it into a retirement village, consisting of villas, other buildings and amenities.
On or about 3 June 2010, Eastwood entered into a deed with Lifestyle Retirement Pty Ltd (‘Lifestyle’) as trustee for the Lifestyle Investment Unit Trust, described as a ‘Deed of Option to Purchase Retirement Village’ (‘Option Deed’). By the Option Deed, Eastwood agreed to grant Lifestyle an option to purchase the ‘Retirement Business’[1] in consideration of payment of an option fee (‘Option’). The Option Deed provided for an ‘Expiry Date’ of 11 May 2016 or such other date as the parties agreed to in writing. Clause 2.2 provided, among other things, that the Option would expire on and could not be exercised after the Expiry Date, and that the Option would expire if ‘Completion’[2] took place after the Expiry Date.
[1]Retirement Business was defined in the Option Deed to mean Eastwood’s business of running the retirement village and all of the things that are necessary for the business to continue operating, including the land, plant and equipment, licences, permits, contractual rights and goodwill.
[2]Completion was defined in the Option Deed to mean the issue of occupancy permits for the villas, a community centre and infrastructure.
The Option Deed provided that, if the Option was exercised in the ‘Term’,[3] a contract would be entered into between Eastwood and Lifestyle for the sale of the Retirement Business at the ‘Price’, which contract would provide for settlement to take place 90 days from the date on which the Option was exercised, unless the parties agreed to an earlier date.
[3]Term was defined in the Option Deed to mean the period commencing on the date of this Deed and ending on the Expiry Date or such other earlier date as the parties may agree to in writing.
The respondent, Joseph Finance and Investment Pty Ltd (‘Joseph’), became trustee for the Lifestyle Investment Unit Trust on 30 October 2015. Eastwood and Joseph agreed on three occasions to extend the Expiry Date.[4]
[4]On 9 May 2016, the Expiry Date was extended to 30 June 2020; on 23 June 2020, it was extended to 13 July 2020; and on 13 July 2020, it was extended to 20 July 2020.
By the time of the extended Expiry Date of 20 July 2020, Completion had not occurred. Construction of the final two villas had not been completed and occupancy certificates had therefore not been issued for them.
A dispute arose between Eastwood and Joseph as to whether the Option Deed had actually expired such that Joseph was not able to exercise the Option, and whether Eastwood had breached the Option Deed.
On 23 June 2021, Joseph commenced its proceeding in the trial division against Eastwood, seeking declaratory relief in respect of the expiry of the Option Deed or damages for breach in the alternative. By its statement of claim, Joseph alleged that Eastwood had failed to perform the necessary construction works to enable occupancy permits to be issued for the remaining two villas before the Expiry Date, and that Eastwood had therefore breached, inter alia, cl 5.1 of the Option Deed (which required Eastwood to use reasonable endeavours to complete the ‘Proposed Development’[5] before the Expiry Date). Joseph also alleged that the term of the Option Deed had not expired and would not expire until seven days after the date on which Eastwood provided Joseph with certain disclosure material.
[5]Proposed Development was defined in the Option Deed to mean the proposed construction of a retirement village on the Land in accordance with an attached planning permit and endorsed plans.
By its amended defence, Eastwood:
(a)denied that it had breached the Option Deed;
(b)contended that the Term had expired by 20 July 2020 at the latest; and
(c)contended that the Option Deed was an ‘agreement to negotiate’ and there was no enforceable agreement to enter into a sale agreement.
At trial, Joseph did not pursue its application for a declaration that the Option Deed was still on foot, but pursued its claim for damages arising from Eastwood’s alleged breach of the Option Deed. That claim was upheld by the trial judge.
By paragraph 1 of the orders made on 15 December 2023 following the delivery of reasons on 7 December 2023, the trial judge ordered that Eastwood pay Joseph damages in the amount of $9,872,719.11 together with interest pursuant to statute of $238,027.20. Orders in respect of costs of the proceeding were made by the trial judge on 6 February 2024. The costs orders are not the subject of the application for leave to appeal.
In this Court, Eastwood seeks leave to appeal from the trial judge’s judgment insofar as the quantification of damages is concerned, relying on two proposed grounds of appeal which will be explained later.

The trial judgment

On 7 December 2023, the trial judge delivered reasons for judgment.[6] The main issues for his Honour’s consideration were:
(a)whether the Option was incapable of being validly exercised by reason of uncertainty or incompleteness of agreement;
(b)whether Eastwood had failed to use reasonable endeavours to achieve Completion within the meaning of the Option Deed; and
(c)whether Joseph had suffered loss which was caused by Eastwood and, if so, how Joseph’s loss should be quantified for the purposes of an award of damages.
[6]Joseph Finance and Investment Pty Ltd v Eastwood Retirement Pty Ltd [2023] VSC 731 (‘Reasons’).
In respect of the first issue, the trial judge held that the Option Deed was binding and enforceable.[7] On the second issue, his Honour concluded that Eastwood had financial capacity to complete the development prior to the Expiry Date, and did not use reasonable endeavours to complete the project in accordance with the provisions of the Option Deed.[8] His Honour held that Eastwood breached clauses 5.1 and 9 of the Option Deed.[9]
[7]Ibid [63].
[8]Ibid [176].
[9]Ibid [176]–[181]. Clause 9 required Eastwood, on request by Joseph, to do everything reasonably necessary or desirable to give full effect to the provisions of the Option Deed and the transactions contemplated by it.
In brief, with respect to the third issue, the trial judge:
(a)held that Joseph had established that Eastwood’s breach of the Option Deed had caused loss to Joseph;[10]
(b)further held that damages were to be assessed on a loss of opportunity basis;[11]
(c)calculated damages by reference to the difference between the value of the Retirement Business and the Price payable by Joseph under the Option Deed;
(d)held that the appropriate valuation date for the Retirement Business was 19 September 2023;[12]
(e)accepted an expert valuation dated 3 October 2022[13] valuing the Retirement Business at that date at $19.2 million (excluding GST), on the basis that it was the most recent evidence as to the market value of the Retirement Business;[14]
(f)determined that the Price was $8,230,312.04 (excluding GST),[15] calculated by reference to the definition of ‘Price’ in cl 1.8 of the Option Deed and the ‘Resident Loans ledgers’ maintained by Eastwood as at 30 June 2020;[16] and
(g)in circumstances where Joseph required finance in order to pay the Price, applied a 10 per cent discount ‘to reflect such risk as may arise in relation to [Joseph] obtaining finance to complete the purchase of the Village having exercised the Option’.[17]
[10]Ibid [199].
[11]Ibid [202].
[12]The trial judge chose 19 September 2023 as the date at which damages were to be assessed for breach of contract, being the date on which Joseph dropped its claim for declaratory relief and thereby elected to claim damages as an alternative to specific performance (see Reasons, [203]–[204] and the authorities cited therein).
[13]The valuation was that contained in the expert report of Mr Dan Magree dated 28 October 2022 (‘Magree Report’). Eastwood did not cross-examine Mr Magree at trial.
[14]Reasons, [219]–[221].
[15]Or $9,053,343.24 (including GST).
[16]Ibid [221].
[17]Ibid.

The application for leave to appeal

Eastwood seeks leave to appeal (and, if leave is granted, to appeal) from paragraph 1 of the orders dated 15 December 2023, with the proposed grounds of appeal relating only to the quantification of damages.
The proposed grounds of appeal are as follows:
(1)the trial judge erred in the assessment of Joseph’s loss, by failing to account for the costs that Joseph would necessarily have incurred in holding the Retirement Business between 2020 (when Joseph would have purchased the Retirement Business) and 19 September 2023 (being the date as at which the trial judge determined the value of the Retirement Business, hereafter referred to as the ‘Election Date’); and
(2)the trial judge erred by concluding, against the weight of the evidence, that the risk that Joseph would not complete the purchase of the Retirement Business was adequately reflected by a 10 per cent discount under the principles attributed to Sellars v Adelaide Petroleum NL.[18]
[18](1994) 179 CLR 332; [1994] HCA 4 (‘Sellars’).
It can readily be seen that many aspects of the trial judge’s decision in respect of damages are not challenged on appeal. In particular, Eastwood does not challenge:
(a)that the relevant valuation date was the Election Date;
(b)the market value of the Retirement Business as at 3 October 2022 and as at the Election Date in the amount of $19.2 million (excluding GST);
(c)that the Price was $8,230,312.04 (excluding GST); or
(d)that damages should be assessed by reference to the difference between the Price and the market value of the Retirement Business as at the Election Date, except insofar as the holding costs were not accounted for.
Thus, the only issues raised by the proposed grounds of appeal are:
(a)whether the trial judge erred in failing to account for the costs Joseph would have incurred in holding the Retirement Business between October 2020 (when completion of the sale contract would have been due had the Option been exercised by 20 July 2020) and the Election Date; and
(b)whether the trial judge erred by concluding that the Sellars discount should be 10 per cent.
Joseph has filed a notice of contention, to the effect that if this Court allows proposed ground 1, then the trial judgment should be affirmed on the ground that the taking into account of the costs incurred in holding the Retirement Business between 2020 and the Election Date would not have resulted in a reduction of the assessed damages, as the likely costs would have been offset against the likely income Joseph could expect to have derived from holding the Retirement Business during the relevant period.
Eastwood contends that if leave to appeal is granted and the appeal is allowed on the basis of proposed ground 1, then absent agreement as to a figure post-judgment, the proceeding should be remitted to the trial division for further hearing on the calculation of the holding costs to be deducted from the assessed damages.
Joseph disagrees with this proposed course: it contends that this Court should calculate the costs to be deducted from the assessed damages. To that end, it applies for leave to adduce further evidence on the appeal, being the affidavit of Mr Antonio Vescio dated 12 March 2024. In the main, that affidavit exhibits documents regarding historic interest rates from the Reserve Bank of Australia and a copy of the ERUT financial statements for FY2023. Eastwood opposes Joseph’s application to adduce further evidence on the appeal.
Consideration of both Joseph’s notice of contention and its application to adduce further evidence is only required if leave to appeal is granted and the appeal allowed on the basis of proposed ground 1.
Eastwood contends that if leave to appeal is granted and the appeal is allowed on the basis of proposed ground 2, then this Court can and should determine the correct Sellars discount for itself, having regard to the findings of the trial judge and the evidence before his Honour. Joseph does not oppose that course in that event.
For the reasons which follow, leave to appeal will be refused.

Proposed ground 1

While proposed ground 1 asserts a failure by the trial judge to account for ‘the costs’ of holding the Retirement Business, as argued, the failure alleged by Eastwood was a failure to account for interest which Joseph would necessarily have incurred on a loan facility between the time when the business would have been purchased in 2020 and the Election Date. It was not disputed that Joseph would have needed to obtain finance in order to purchase the Retirement Business.
In order to understand the arguments, it is necessary to set out the circumstances in which this issue arose.

The proceeding at first instance

Joseph initially sought two forms of relief in the alternative: a declaration to the effect that the Option Deed had not expired and damages. In further and better particulars of its statement of claim,[19] Joseph particularised its loss as being:
... the greater of:
(1)the difference between the present value of the Retirement Business …, and the Price … which Joseph would have been required to pay at the date when Completion under the Option Deed would have occurred, but for Eastwood’s breach … (Proper Completion Date); and
(2)the difference between the value of the Retirement Business at the Proper Completion Date, and the Price at the Proper Completion Date, together with profits made by Eastwood from its operation of the Retirement Business between the Proper Completion Date and the date of judgment.
[19]This document is dated 15 September 2021.
The claim for declaratory relief was abandoned on 19 September 2023, when Joseph served its outline of opening submissions. Subsequently, there was an issue between the parties as to the date on which the Retirement Business should be valued. Joseph contended that the critical date was the Election Date, whereas Eastwood contended that it was 20 July 2020.
In its written outline of closing submissions,[20] filed after the parties closed their cases at trial, Eastwood asserted that ‘the normal date of assessment’ for the valuation of the Retirement Business was mid–2020, being the date which, in its hypothetical counterfactual, Joseph would have acquired the Retirement Business. Eastwood then submitted:
If [Joseph] seeks to use the valuation date more than two years later, it would need to establish this date as a departure from the normal position and account for the significant amount of interest that it would have needed to have been paying for the previous two years. It has done neither.
[20]This document is dated 18 October 2023.
In final address, the matter was dealt with by Eastwood’s trial counsel,[21] in the following terms:
[EASTWOOD’S COUNSEL]: Your Honour has to consider, with respect, what would have occurred in the period between the putative transaction and two years later, and if Your Honour is satisfied that the transaction would have proceeded by a loan of the full amount of purchase price, then interest is run.
Interest is running and Mr McGree’s [sic] valuation of the company — no criticism of him, that doesn’t assess the value of the company on the basis that there’s a debt — a purchase price debt and so account — the consequence of moving the valuation date was that the plaintiff had to account for things that occurred in an intervening period, and they have not accounted for that. If, for instance, Your Honour, there was a 10 per cent loan then interest is going to be accruing at a rapid rate by our illustrative map amounting to — it’s about $75,000 per month.
HIS HONOUR: Yes. It would certainly roll along.
[EASTWOOD’S COUNSEL]: That’s on a $9m purchase price and even more on a higher purchase price. There’s no evidence about this. We bear no onus in demonstrating this but what it does is, with respect, the absence of any evidence about this impacts on the cogency of what Your Honour is being asked to do, which is set in stone, a loss amount without any evidence of what occurred on the way through and no evidence, for instance, about what interest rate would have been obtained by a lender and how those payments would have been met.
[21]Not counsel who appeared in this Court.
In response, in reply submissions, Joseph’s counsel submitted to the trial judge that the Court Book contained evidence of the profit that was made by Eastwood through the operation of the Retirement Business over the period during which Eastwood submitted that Joseph must account for interest. The evidence was contained in the financial statements of the ERUT for the financial years ending 30 June 2020, 30 June 2021, and 30 June 2022. Joseph submitted that had the purchase proceeded in 2020, there was no reason to think that it would not have continued to operate the Retirement Business, with an expectation of similar revenue and expenses to those contained in the ERUT financial statements. Any interest on a loan facility which Joseph might have incurred during the years between mid–2020 and the Election Date would therefore have been more than covered by its profits.

Trial counsel for Eastwood took no objection to these submissions, and nothing further was said on the issue at trial.

The trial judge’s consideration of the issue

As we have said, the trial judge determined that the date of valuation should be the date when Joseph abandoned its claim for declaratory relief (ie 19 September 2023) and thereby confined the relief it sought to a claim for damages. Specifically, the trial judge said:
The plaintiff seeks to adopt the valuation contained in the Magree Report, being a valuation as at 3 October 2022, of $19,200,000 plus GST. As to the valuation date, the defendant makes reference to the plaintiff’s opening where the valuation date of ‘February 2022’ was adopted relying on the Magree Report which, as it is observed, has a valuation date of 3 October 2022. In any event, the defendant contends that the normal date of assessment would be mid–2020, being the date on which, in its hypothetical counterfactual, the plaintiff would have acquired the Village. The defendant criticises the plaintiff on the basis that it seeks to use the valuation date more than two years later and, consequently, would need to establish this date as a departure from the normal position and account for the significant amount of interest that it would have needed to have been paying for the previous two years, but has done neither. Neither, it is said, did the plaintiff lead any expert evidence on the valuation of the Village as at the Option Expiry Date. The closest thing to an independent valuation contemporaneous with the Expiry Date in evidence is said to be the indicative valuation of ‘$12.5mill–$13mill’ from Jones Lang LaSelle on 26 May 2020, upon which Thomas Camp relied in his email to the Bank of Queensland on 25 June 2020.
The plaintiff, on the other hand, submits that the most recent evidence as to the market value of the Retirement Business is that contained in the Magree Report. Moreover, it observed that Dan Magree was not cross-examined on his opinion as set out in this Report. As to the appropriate date for the valuation, the defendant’s criticism of the use of a date more than two years after the Expiry Date is, in my view, addressed by the plaintiff’s contention that where, as in the present case, it seeks damages as an alternative to specific performance, the date of the election of that course is the critical date, rather than the Option Expiry Date. On the basis the valuation as stated in the Magree Report is only approximately 11 months prior to that election date and, having regard to the authorities requiring the Court to do the best it can with the evidence before it in calculating damages, the Magree Report valuation is appropriately accepted. Further, in relation to the Magree Report it is the position that Dan Magree, the author of the report, was not cross-examined on his opinion and, additionally, the Court does not have the benefit of any evidence as to how the valuation of the Village may have changed — by way of increase or decrease — between 3 October 2022 and the election date. Hence, the Court must do the best it can, as indicated.[22]
[22]Reasons, [219]–[220].
Having noted Eastwood’s contention that Joseph was required to ‘account for the significant amount of interest that it would have needed to be paying’, the trial judge then calculated damages without making any deduction in respect of interest which Joseph would likely have been required to pay from October 2020 to September 2023.

Eastwood’s submissions on appeal

In this Court, Eastwood does not contend that the trial judge erred in selecting the Election Date as the appropriate valuation date for the Retirement Business. Rather, Eastwood submits that the trial judge fell into error because, having chosen that valuation date, his Honour subtracted the Price as if Joseph had exercised the Option and purchased the Retirement Business in 2020, but failed to account for costs (being interest) that Joseph would have incurred in connection with acquiring and holding it from 2020 to 2023. Eastwood submits that the opportunity to be valued, characterised accurately, was an opportunity that involved not only purchasing the Retirement Business in 2020 but also holding it until 2023.
The uncontested evidence before the trial judge was that Joseph was seeking a long‑term loan with a minimum term of five years to finance the purchase of the Retirement Business. Interest would have been incurred on any such facility or arrangement.
At trial, Joseph referred to various potential external financing options, but did not put on any specific evidence in respect of interest rates attaching to those loan prospects.[23] Eastwood submits that this lacuna in the evidence did not relieve the trial judge of the requirement to give effect to the compensatory principle — namely, that the measure of damages for a breach of contract is the amount required to place the party awarded damages in the same position as if the contract had been performed as promised, and not in a superior position.[24]
[23]There was some evidence of other loans by one potential lender (Curry Securities) to companies linked to Joseph’s director at an interest rate of 12 per cent per annum.
[24]Citing Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272, 286 [13] (French CJ, Gummow, Heydon, Crennan and Kiefel JJ); [2009] HCA 8, in turn citing Robinson v Harman (1848) 1 Exch 850, 855 (Parke B); 154 ER 363, 365; Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64, 82 (Mason CJ and Dawson J); [1991] HCA 54, cited in Clark v Macourt (2013) 253 CLR 1, 11 [27] (Crennan and Bell JJ), 19 [60] (Gageler J); [2013] HCA 56.
Eastwood submits that, by failing to account for the interest incurred from 2020 to 2023, the trial judge’s award of damages results in a windfall gain for Joseph; it obtains the benefit of the 2023 valuation date without the costs which it would have incurred had the contract been performed as promised. By placing Joseph in a superior position to that which it would have been in had the contract been performed, the award did not give effect to the key principles of compensation for contractual breach.

Joseph’s submissions on appeal

Joseph emphasises the circumstances in which the issue of a potential ‘interest discount’ arose below, which we have referred to in paragraphs 27 to 32 above. It refers to its particularisation of its loss as the greater of the difference between the present value of the Retirement Business and the Price that Joseph would have been required to pay at the date when Completion would have occurred, and the difference between the value of the Retirement Business at the Proper Completion Date and the Price at the Proper Completion Date, together with profits made by Eastwood in its operation of the Retirement Business between the Proper Completion Date and date of judgment. It refers to its submission in opening that damages should be assessed as the present value of the development less the price payable at the time. And it refers to the written closing submissions filed after the close of evidence, in which Eastwood raised for the first time the question of a reduction to any award of damages for interest attaching to financing Joseph might have obtained. This was said to be the context for Joseph’s closing submissions referencing the financial statements of the ERUT which were in evidence for the years ended 30 June 2020, 2021 and 2022 and the fact that there was no reason to think that Joseph would not have continued to operate the business, generating similar revenue and expenses to the ERUT.[25]
[25]Excluding or adjusting for expenditure such as GST adjustment and legal fees relating to this proceeding.
Joseph does not cavil with Eastwood’s contention that the ‘lacuna’ in evidence concerning the interest rates attaching to its loan prospects did not relieve the trial judge from giving effect to the compensatory principle, but submits that his Honour did not ignore this issue — Eastwood’s position is referenced expressly in the Reasons.[26]
[26]Reasons, [219].
Joseph contends that it is evident from the transcript of the hearing that the trial judge understood Joseph’s submission in reply that, in the hypothetical, interest amounts Joseph would have incurred in connection with a loan facility would have been paid out of the profits of the Business. In this regard:
[JOSEPH’S COUNSEL]: … the amount of any hypothetical interest is effectively going to be paid out of - - -
HIS HONOUR: The profits.
[JOSEPH’S COUNSEL]: - - - the profits that would be generated from the operation of the village.
Joseph submits that the trial judge did not fail to account for interest; it says that the trial judge considered Eastwood’s arguments regarding an interest discount and rejected them for the reasons submitted by Joseph. This is said to be clear from the Reasons, where the trial judge adopted Joseph’s proposed calculation of damages without such a discount.
Joseph emphasises that the assessment of damages for breach of contract in respect of hypothetical situations is necessarily imprecise (and may include a degree of speculation).[27] Insofar as there is imprecision, Joseph cites the following statement of Young JA of the NSW Court of Appeal in McCartney v Orica Investments Pty Ltd:
Where the plaintiff is entitled to damages and compensation and their computation is made more difficult by the defendant’s action, then the Court may assume the worst against the defendant consistent with the evidence.[28]

Consideration

[27]Relying on Maritime Union of Australia v Fair Work Ombudsman [2015] FCAFC 120, [34] (Allsop CJ, Mansfield and Siopis JJ) (‘Maritime Union of Australia’).

[28][2011] NSWCA 337, [218] (‘McCartney’).

There is no doubt that, in arriving at a calculation of Joseph’s damages before making any Sellars discount, the trial judge did not make any deduction for interest which Joseph would have necessarily incurred between October 2020 and September 2023 on any loan facility. The question so far as proposed ground 1 is concerned is whether the trial judge erred by failing to account for this interest in his calculation.
The trial judge expressly referred to Eastwood’s submission on this issue.[29] However, his Honour said nothing further on the issue in the Reasons. To that extent, in some ways we are left to speculate as to the precise path of reasoning which his Honour engaged in when dealing with the issue.
[29]Reasons, [219].
We should immediately note, however, that there is no proposed ground of appeal which complains about the inadequacy of the trial judge’s reasons. In any event, judges do not have to mention in their reasons everything which was raised at hearing. In this regard, the majority of the High Court in Whisprun Pty Ltd v Dixon stated:
A judge’s reasons are not required to mention every fact or argument relied on by the losing party as relevant to an issue. Judgments of trial judges would soon become longer than they already are if a judge’s failure to mention such facts and arguments would be evidence that he or she had not properly considered the losing party’s case.
… To suggest that a trial judge has not properly considered a party’s case is a serious charge. Such a suggestion should be accepted only when the record of the trial or other evidence persuasively suggests that the judge failed to discharge that paramount judicial duty.[30]
[30](2003) 200 ALR 447, 464 [62]–[63] (Gleeson CJ, McHugh and Gummow JJ); [2003] HCA 48. See also Crowe Horwath (Aust) Pty Ltd v Loone (2017) 54 VR 517, 533 [64] (Ashley, Priest and Beach JJA); [2017] VSCA 181.
There was no dispute between the parties in this Court that, on the evidence tendered at trial, the financial statements for the ERUT for the financial years ending 30 June 2020, 30 June 2021 and 30 June 2022 showed, excluding interest expenses and extraordinary expenses, a taxable income (profit) from the Retirement Business which totalled at least $2.789 million.
Moreover, while Eastwood’s submissions to the trial judge on the amount of interest to be taken into account in the three years between October 2020 and September 2023 were sparse (to say the least), the ultimate submission seems to have been that the amount to be taken into account was $2.7 million (10 per cent per annum on a loan of $9 million[31] over three years).
[31]See n 15 and paragraph 30 above.
The amount Eastwood sought to have taken into account by the trial judge ($2.7 million) could thus effectively be ignored if one accepted Joseph’s submissions that the profit from the Retirement Business during the same basic timeframe (calculated by excluding interest and extraordinary expenses) was to be offset against the interest to which Eastwood referred.
In argument in this Court, Eastwood resisted the notion that the amount of profit shown in the financial statements could be offset against its interest claim on the basis that that profit was retained profit which, to that extent, had already been taken into account in Mr Magree’s valuation. In response to that submission, however, Joseph observed that Mr Magree’s valuation was not asset-based — Mr Magree used a discounted cash flow method. It was thus submitted that it was entirely appropriate for the trial judge (and indeed this Court, if we were to look at the matter afresh) to offset the profit of $2.789 million against the interest amount of $2.7 million. No answer was made by Eastwood in its submission to this Court.
The way in which the interest issue developed before the trial judge was unsatisfactory. Eastwood’s submissions on this topic were made very late in the piece and were somewhat tentative and lacking in detail. Nevertheless, they were responded to by Joseph’s counsel as well as might be thought possible in his oral reply during the course of final addresses. There is also a distinct irony in Eastwood’s position that if proposed ground 1 succeeds, calculation of the costs to be deducted from the damages should be remitted to the trial division on the basis that this Court does not have sufficient evidence before it to perform the calculation itself. The logical inference from that position is that Eastwood contends there was insufficient evidence before the trial judge for his Honour to have calculated the interest costs. In that case, upon what evidence would Eastwood have had the trial judge base his calculations?
As we have said, the Reasons do not refer to Joseph’s submission on the interest issue, or to how his Honour dealt with Eastwood’s submissions on the interest issue, leaving this Court in a state of uncertainty as to his Honour’s approach to the issue. All that can be said with confidence is that his Honour did not expressly factor interest which Joseph would likely have had to pay between October 2020 and September 2023 into his Honour’s damages calculation.
That said, if we assume that his Honour erred in the way contended for by Eastwood, it would fall to this Court to consider the matter afresh on the evidence led at trial.[32]
[32]Contrary to Joseph’s submissions on its application to admit fresh evidence in this Court, there is (and was) no basis upon which that application could be acceded to; and, in any event, the application ultimately was not pursued by Joseph.
Considering the evidence led at trial for ourselves, it is plain that the profits made during the three years closest to the period between October 2020 and September 2023 should, in any calculation, be offset against the amounts of interest which Joseph would have had to pay in order to hold the Retirement Business during that period. While there can be no precision about these matters, it appears that these amounts were near enough to equal that there should be no alteration to the trial judge’s pre-Sellars figure.
It follows that, if this Court were called upon to re-determine the pre-Sellars component of the damages calculation, we would arrive at the very same figure to which the trial judge arrived. Thus, we would conclude that there is no basis for this Court to interfere with that figure. The question of any failure by the trial judge to take account of interest (which we take leave to doubt in any event) would then become of no relevant consequence in the assessment of Joseph’s damages.
For these reasons, proposed ground 1 must be rejected.

Proposed ground 2

Proposed ground 2 is that the trial judge erred in concluding, against the weight of the evidence, that the risk that Joseph would not complete the purchase of the Retirement Business was adequately reflected by a Sellars discount of 10 per cent. As argued, the error alleged by Eastwood is that the Sellars discount applied by the trial judge for the prospect that Joseph may not obtain the requisite finance in order to complete the purchase was manifestly inadequate given the evidence adduced about the obstacles to be surmounted for Joseph to obtain finance.

The proceeding at first instance

At trial, Eastwood argued that Joseph would not be able to establish, on the balance of probabilities, that it had the funds to complete the purchase. It contended that Joseph’s damages claim should be characterised as a loss of opportunity claim and that any quantification of its alleged loss would need to take into account the appropriate discount to reflect the risks that the transaction would not have eventuated. In its closing submissions, Eastwood submitted that the appropriate Sellars discount to reflect the risk that Joseph would not have secured the finance to complete the purchase in or around July 2020 was around 80 to 90 per cent.
Joseph submitted at trial that its chances of completing the sale contract were at least 90 per cent, if not 100 per cent. It relied on the fact that the Price was around half the value of the Retirement Business, making it a very attractive loan proposition and thus highly probable that the necessary finance would have been obtained. Further, Joseph had the capacity to obtain finance from the Bank of Queensland (‘BOQ’), Curry Securities, or the resources of its own director, Mr Camp. Joseph conceded that the latter of these three possibilities should be given little weight, such that the real issue was the likelihood of obtaining finance from BOQ or Curry Securities.

The trial judge’s consideration of the issue

Having accepted Eastwood’s submission that damages ought be assessed on a loss of opportunity basis, the trial judge referred to extracts from Masters Home Improvement Pty Ltd v North East Solution Pty Ltd[33] and ACN 115 918 959 Pty Ltd v Hoeys Lawyers Pty Ltd,[34] upon which Eastwood relied.[35]
[33](2017) 372 ALR 440 (Santamaria, Ferguson and Kaye JJA); [2017] VSCA 88 (‘Masters Home Improvement’).
[34][2021] VSC 79 (Blue AJ) (‘Hoeys’).
[35]Reasons, [200].
In Masters Home Improvement, this Court said:
In considering damages for loss of a commercial opportunity, the court asks first whether there was a commercial opportunity of some value (which is more than speculative or negligible); that is, was there a chance? Secondly, the court looks to whether that opportunity has been lost; that is, would the plaintiff have pursued the opportunity? The third step is to consider what amount should be awarded having regard to the prospects of success if the opportunity had been pursued. In taking this third step, the courts’ task is to apply a discount which reflects the prospects of success. This is sometimes referred to as a Sellars discount.[36]
[36](2017) 372 ALR 440, 548 [411] (Santamaria, Ferguson and Kaye JJA) (citations omitted).
In Hoeys, Blue AJ, sitting in the trial division, said the following as to the standard of proof required:
It is necessary first to identify the valuable opportunity that the plaintiff has lost by reason of the defendant’s breach. Invariably this will require the plaintiff to prove on the balance of probabilities that, as a result of the defendant’s breach, the plaintiff did not or could not take that opportunity and otherwise would have taken it. Thus, the issue of causation will turn on what the plaintiff would have done. However, if this is established, and the court has proceeded to the stage of assessing the value of the lost opportunity, the position is different. At that stage, the mere fact that the assessment may turn to some degree on the hypothetical conduct of the plaintiff in a specific respect does not necessarily entail that the plaintiff must prove on the balance of probabilities that the plaintiff would have so acted.[37]
[37][2021] VSC 79, [765].

In this case, the trial judge took the view that in establishing its loss of opportunity, Joseph had to show, on the balance of probabilities, that it lost the opportunity to complete the purchase of the Retirement Business, which necessarily involved it establishing that it would have exercised the Option; signed a sale agreement as contemplated by the Option Deed; and completed the purchase upon the settlement date (which was 90 days after exercising the Option). The trial judge found that Joseph had established all of these elements.[38]
[38]Reasons, [187]–[199].
Having found that Joseph had lost an opportunity which would have been pursued had it not been lost, that is, having satisfied the causation element, the trial judge went on to consider the third step referred to in Masters Home Improvement, being whether to apply a discount reflecting the prospect of success and, if so, what level of discount.
In this regard, the trial judge stated as follows:
In terms of the Sellars discount it is, in my view, reasonable to apply a 10 per cent Sellars discount to reflect such risk as may arise in relation to the plaintiff obtaining finance to complete the purchase of the Village having exercised the Option. As indicated previously, I accept that the plaintiff has provided evidence as to its ability to secure the funds to complete the purchase but, nevertheless, it could not sensibly be taken as 100% assurance that this finance might ultimately be obtained. Nevertheless, I am of the opinion that the evidence that is available to the Court together with the commercial incentive to exercise the Option having regard to the value of the Village and the Option Price, are factors which would, in my view, also weigh in the mind of a financier.[39]
[39]Reasons, [221] (footnotes omitted).
In other words, the only matter which the trial judge concluded warranted a Sellars discount was whether Joseph would have obtained the finance it required in order to complete the purchase. The trial judge’s approach in this regard is not challenged in this Court: all that is challenged is the amount of the Sellars discount.

Eastwood’s submissions on appeal

In this Court, Eastwood describes the critical difficulty which Joseph had to surmount before it could realise the opportunity to purchase the Retirement Business as the need to obtain finance from a third party. Eastwood submits that the trial judge’s reasoning in this regard was ‘economical’, consisting of the observation that there was not a ‘100% assurance that this finance might ultimately be obtained’, but that the ‘commercial incentive’ to exercise the Option would ‘weigh in the mind of a financier’.[40]
[40]Referring to Reasons, [221].
Eastwood contends that the observation that there was no ‘100% assurance’ of finance was manifestly an understatement. It says that the undisputed evidence showed that Joseph’s entreaties to lenders were at a preliminary stage, that no offer of finance had been made, and that, at most, potential lenders were open to considering an application.
Eastwood observes that Joseph’s evidence as to a possible loan facility from BOQ consisted of correspondence between Mr Camp and a representative of BOQ. It submits that the ‘high-water mark’ of that correspondence was an email of 25 June 2020 from the BOQ representative to Mr Camp responding to Mr Camp’s request for an indication of BOQ’s ‘lending appetite’. In this email, the BOQ representative stated ‘[w]e’ll lend up to a 60% LVR against the valuation’. Eastwood makes the following submissions about the email:
(a)while the trial judge found that it was a reasonable inference that the Retirement Business would have been valued as at least $15 million at that time, and that a loan based on 60 per cent LVR would therefore have provided Joseph with the full purchase price, the trial judge’s finding does not address the logically anterior question as to the probability that such a facility would have been offered at all;
(b)the email was not an offer of finance — it was an indication of what BOQ would be willing to lend if Joseph provided the requisite information and if BOQ decided to make an offer to lend;
(c)at most, the email was capable of supporting an inference that BOQ was open to considering an application in the proper form; and
(d)the email was not capable of justifying a conclusion that the prospect of obtaining finance from BOQ was in the vicinity of 90 per cent, which implies near certainty, particularly where there was no evidence of BOQ’s lending criteria or assessment process.
Eastwood submits that Joseph’s evidence as to the prospect of obtaining finance from Curry Securities was ‘even more nebulous’ and could not support a conclusion that it was in the vicinity of 90 per cent, as:
(a)Joseph merely relied on Curry Securities having previously loaned to business interests with which Mr Camp was associated, and on a conversation that Mr Camp had with Mr Ron Curry about the Retirement Business and his negotiations with Eastwood, in which Mr Curry merely asked Mr Camp to ‘keep me up to date with what’s going on’;
(b)there was no evidence that Curry Securities was, or would have been, willing to agree to a long-term loan; and
(c)the trial judge went no further than recording Joseph’s submissions that funds could have been obtained from Curry Securities.
Eastwood submits that in addition, there were other factors which reinforced the uncertainty as to whether Joseph would obtain funding: the fact that Eastwood itself had not been able to obtain bank financing over the Retirement Business in the previous decade; the lack of evidence about any bank’s lending assessment process and criteria, or conditions in the lending market in the midst of the COVID-19 pandemic; the lack of any evidence that Joseph or Mr Camp held valuable assets as at July 2020; and the prior association of Mr Camp with the collapse of another retirement village project. These matters should have been taken into account in determining the appropriate discount, which the trial judge failed to do.
Eastwood was at pains to contrast this case with the approach taken in Hoeys, particularly in terms of the evidence led as to the prospects of gaining finance. In that case, the plaintiff adduced evidence of its dealings with a finance broker and a bank. Blue AJ found that there was ‘a very high prospect’ that the broker would have been able to arrange the requisite finance.[41] The bank had given an indicative offer, and Blue AJ found that the bank’s representative was in a position to confidently predict whether the loan would be approved.[42] Nonetheless, Blue AJ concluded that the cumulative prospects of obtaining finance were 60 per cent, having regard to the hypothetical nature of the question, the difficulty in obtaining conclusive evidence, and the fact that neither the broker nor the bank were legally committed to providing finance.[43] Eastwood says that the uncertainties in this instance are even greater than those present in Hoeys.
[41][2021] VSC 79, [1306].
[42]Ibid [1310].
[43]Ibid [1306], [1325].
In this Court, Eastwood expressly did not urge a particular percentage discount upon us. After the Bench noted that, at trial, Eastwood had advocated a discount of 80 to 90 per cent, counsel for Eastwood stated that it did not advocate that figure on appeal and said no more than that the contingency ‘was somewhere in the middle’ of the range.

Joseph’s submissions on appeal

Joseph contends that Eastwood’s submission on appeal suggest that paragraph 221 of the Reasons (cited at paragraph 65 above) was the sum total of the trial judge’s reasoning regarding the Sellars discount, whereas this paragraph was preceded by a summary of the relevant evidence, the parties’ contentions, the applicable legal principles, and his Honour’s reasoning regarding the prospect of Joseph obtaining finance to complete the purchase of the Retirement Business.
Joseph contends that:
(a)the Court should not interfere with the trial judge’s assessment of the Sellars discount unless it finds that the trial judge’s reasoning was so manifestly wrong that it must impose its own assessment over that of the trial judge; and
(b)any lack of evidence as to Joseph’s ability to finance the purchase of the Retirement Business in October 2020 must be assessed in the context where it was Eastwood’s breach of contract which meant that from July 2020 there was no utility in Joseph continuing to explore avenues for financing.
Furthermore, Joseph submits that the starting point for the assessment of a loss of chance is what was proved at trial. The trial judge found that Joseph would have been willing and able to complete the purchase of the Retirement Business in October 2020 had it exercised the Option in or about July 2020.[44] That finding, going to causation of loss, is not appealed.
[44]Reasons, [199].
Joseph relies on the trial judge’s reasoning on causation, contending that his Honour also relied upon this reasoning in his consideration of the appropriate figure for the discount. In this regard, Joseph submits that the trial judge considered the evidence and correctly found that:
(a)the preliminary status of Joseph’s applications for finance as at June 2020 was symptomatic of Joseph’s situation having been caused by Eastwood’s breach;[45]
(b)the BOQ had indicated a willingness to lend up to 60 per cent of the value of the Retirement Business, and 60 per cent of $15 million would provide Joseph with the full $9 million purchase price;[46] and
(c)Eastwood’s own inability to obtain bank finance was not a basis to conclude that Joseph’s prospects of obtaining finance were uncertain.[47]
[45]Ibid [197].
[46]Ibid [190]–[192].
[47]Ibid [197].
Further, Joseph submits that the trial judge properly considered that the difference between the Price and the value of the Retirement Business ($9 million versus $15 million) provided a commercial incentive for Joseph to source finance in time, which was a ‘very powerful factor against the likelihood of non-completion of the purchase which is represented by the Sellars discount’.
Joseph submits that if, contrary to its position, this Court decides to adjust the Sellars discount, it should be less than 50 per cent so as to accord with the trial judge’s unchallenged finding on causation that Joseph would have been able to complete the purchase.

Consideration

Our consideration of proposed ground 2 must begin with the principles applicable to an appeal where the question is one of an evaluative exercise based on a past hypothetical, which is what proposed ground 2 involves.
Eastwood accepts that the determination of such a question involves an exercise of evaluative judgment and that an appellate court should exercise a measure of restraint absent identified error in the trial judge’s findings or methods. Its case on appeal is that the trial judge manifestly erred in his findings and methods and that the 10 per cent discount found by the trial judge was manifestly inadequate. In those circumstances, it submits that this Court can and should substitute its own assessment of the Sellars discount.
Joseph submits that the Court should not interfere with the trial judge’s assessment of the Sellars discount unless the trial judge’s reasoning was so manifestly wrong that this Court must impose its own assessment over that of the trial judge.
The nature of an appellate court’s role when a trial judge has assessed damages based on the estimated likelihood of a past hypothetical was considered by the New South Wales Court of Appeal in McCartney.[48] After surveying a range of appellate decisions, Giles JA concluded that a trial judge’s determination of the discount for the estimated likelihood of a past hypothetical ‘should be reviewed on appeal in accordance with the principles governing review of a discretionary decision’,[49] namely, in accordance with the principles in House v The King.[50] The Full Federal Court referred to McCartney with approval in Maritime Union of Australia, stating that the ‘assessment of the value of the loss of an opportunity may involve an evaluative judgment that calls for restraint in appellate review’.[51]
[48][2011] NSWCA 337, [111] (Giles JA), [192] (Macfarlan JA), [193] (Young JA).
[49]Ibid [128], with Macfarlan and Young JJA agreeing (at [192] and [193], respectively).
[50](1936) 55 CLR 499.
[51][2015] FCAFC 120, [34]–[35] (Allsop CJ, Mansfield and Siopis JJ).
These statements are consistent with what this Court has previously said when considering an appeal from an award of damages based on an assessment of contingencies. While House v The King is not expressly referred to, in Bennett v Estate of Talacko, on a challenge to the assessment of damages made by the primary judge arising from a loss of opportunity case, this Court stated:
The judge was faced with an evaluative exercise which involved a number of variables. The question before us is whether those variables, as identified by the judge, pointed to a weak case or to a hopeless one. This is very much a matter of impression. It is exactly the kind of qualitative evaluation with which an appellate court should be slow to interfere. As Brennan and Dawson JJ observed in Malec v JC Hutton Pty Ltd, ‘[d]amages founded on hypothetical evaluations defy precise calculation’. For that reason, in the absence of identified error in the trial judge’s findings or method, an appellate court examining an award of damages based on an assessment of contingencies should not simply substitute its own evaluation.[52]
[52][2020] VSCA 99, [108] (Beach, McLeish and Niall JJA) (citations omitted).
This Court has recently summarised the well-known principles in House v The King as follows:
… it must be shown that the decision was made in error by acting on a wrong principle, or giving weight to extraneous or irrelevant matters, or failing to give weight to relevant considerations or making a mistake as to the facts. In addition, the result may be so unreasonable or plainly unjust that the appellate court may infer that there has been some failure to properly exercise the discretion.[53]
[53]Fei v Hexin Pty Ltd [2024] VSCA 158, [68] (Kennedy, Macaulay and Lyons JJA).
We are satisfied that the principles in House v The King apply to appellate review of a trial judge’s assessment of a Sellars discount in a loss of opportunity case. Accordingly, before we will intervene in the decision of the trial judge, we must be satisfied that in assessing the discount at 10 per cent, the trial judge in this case made an error of the type referred to in House v The King.
While the trial judge’s express discussion of the Sellars discount and his reasons for assessing it at 10 per cent are contained in a single paragraph of the Reasons,[54] that paragraph must be read in light of what preceded it. In paragraphs [182] to [199] of the Reasons, his Honour dealt with the question of causation, the most prominent element of which on the argument before him was whether Joseph would be able to obtain the requisite finance to complete the purchase. The trial judge carefully evaluated the evidence, which included all of the matters upon which Eastwood relies on appeal, expressing his views on each aspect of that evidence. We accept Joseph’s submission in this Court on this point, set out in particular at paragraph [77] above. At paragraphs [200] to [202] of the Reasons, the trial judge set out Eastwood’s argument that this was a loss of opportunity case, the relevant principles regarding assessing damages in such a case and his Honour’s reasons for accepting that proposition. No challenge is made to these findings.
[54]Reasons, [221].
Little to no utility is gained from a comparison of the level of the Sellars discount assessed by the trial judge with other cases. It is trite to point out that these cases are heavily fact-dependent, that they involve matters of impression, and that they often involve the assessment of multiple contingencies. We find no assistance in the comparison made between Hoeys and this case. True it is that the type of evidence adduced in the former as to the attitude of the lenders was arguably more robust than that adduced in this case, but focussing on that ignores other factors which may have had a bearing on the outcome, such as the quality of the asset being purchased, the underlying security, the LVR, or the borrower’s standing.
Here, there was only one relevant contingency, which was relatively straightforward in nature: what were Joseph’s chances of obtaining external finance in order to complete the purchase of the Retirement Business in October 2020? The trial judge clearly evaluated those chances as being very high, but was unwilling to treat them as 100 per cent certain and therefore applied a modest discount of 10 per cent to cater for that eventuality. He considered that the difference between the market value and the Price at that time was such that Joseph would have been highly motivated to complete the purchase and, more importantly, that this differential would have made a loan an attractive proposition for a lender. Indeed, he found that Joseph would have been able to borrow the entirety of the purchase price based on a LVR of 60 per cent. The trial judge accepted the evidence regarding BOQ’s preparedness to provide finance to Joseph, noting that short term finance from Curry Securities was also likely available.
In these circumstances, we do not accept that the trial judge fell into error when assessing the Sellars discount. The figure arrived at by his Honour was open on the evidence, such that it cannot be said that it was manifestly wrong or inadequate, and it is therefore not one with which we should or would interfere.
Proposed ground 2 must also be rejected.

Conclusion

For the above reasons, leave to appeal is refused.
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[2025] VSCA 30

12 March 2025