Fenridge Pty Ltd v Retirement Care Australia (Preston) Pty Ltd (No 2)
[2013] VSC 629
•18 November 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
S CI 2009 07142
| FENRIDGE PTY LTD (ACN 052 286 521) | Plaintiff |
| v | |
| RETIREMENT CARE AUSTRALIA (PRESTON) PTY LTD (ABN 51 113 960 946) & ORS | Defendants |
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JUDGE: | HARGRAVE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 13 November 2013 | |
DATE OF JUDGMENT: | 18 November 2013 | |
CASE MAY BE CITED AS: | Fenridge Pty Ltd v Retirement Care Australia (Preston) Pty Ltd & Ors (No 2) | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 629 | |
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BREACH OF CONTRACT – Tenant breached two separate obligations in lease agreement – First breach gave rise to entitlement to damages for loss of commercial opportunity – Second breach gave rise to entitlement to damages for breach of make good obligation – Loss of opportunity damages calculated on assumption that the make good obligation had been complied with by the tenant at no cost to the landlord – Whether tenant nevertheless entitled to separate damages award for breach of the make good obligation – Held: separate damages award for breach of make good obligation would amount to double compensation – Haines v Bendall (1991) 172 CLR 60, 63 applied.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr C M Scerri QC with Ms M Norton | Arnold Bloch Leibler |
| For the Defendants | Mr D G Collins SC with Mr D McAloon | Clayton Utz |
HIS HONOUR:
On 30 August 2013, the Court published reasons for judgment following a 14 day trial (‘principal reasons’).[1] These reasons should be read in conjunction with the principal reasons, and assume familiarity with them. These reasons adopt the same terminology as contained in the principal reasons.
[1]Fenridge Pty Ltd v Retirement Care Australia (Preston) Pty Ltd & Ors [2013] VSC 464.
In the principal reasons, the Court held that Fenridge had established its case in the following respects:
(1) that RCA breached the continuing business obligation and the implied terms, that Regis wrongfully induced those breaches, and that RCA and Regis are accordingly jointly and severally liable to Fenridge for damages for loss of a valuable business opportunity;[2] and
(2) that RCA breached the make good obligation, and that Fenridge has suffered loss as a result of that breach which it is entitled to recover from RCA.[3]
[2]Ibid [390].
[3]Ibid [394].
In the course of the principal reasons, the Court determined that Fenridge’s loss of opportunity damages should include a component assessed at $3,956,000, representing 80 per cent of the full value of the principal aspect of the lost opportunity.[4] The Court’s assessment of that full value was based upon the evidence of a valuer called by Fenridge, Geoffrey Brown. Mr Brown made a number of key assumptions in his valuation report, including that:
(1) the scope of the works required to be undertaken by RCA under the make good obligation was that alleged by Fenridge, and that works of that scope had been performed by RCA before the end of the lease and at its cost (‘the make good assumption’); and
(2) Fenridge’s proposed extensions and refurbishment of the nursing home would be undertaken in accordance with existing plans for which approval had been obtained, and that the condition of the premises after the works were completed would be ‘as new’ (‘the further works assumption’).[5]
[4]Ibid [288]-[296], [390(2)].
[5]Ibid [292].
In the principal reasons, the Court considered arguments advanced by RCA that Fenridge had suffered no loss as a result of RCA’s breach of the make good obligation, and rejected those arguments.[6] The scope of the works which were necessary to comply with the make good obligation, and the costs of performing those works, was not determined in the principal reasons – but left to determination by a special referee.[7]
[6]Ibid [337]-[372].
[7]Ibid [372].
The Court has yet to make any orders or authenticate any judgment in the proceeding. In these circumstances, RCA contends that the principal reasons, if carried into effect by authenticated judgment of the Court, would have the effect of giving Fenridge double compensation for breach of the make good obligation, because the Court held in the principal reasons that Fenridge is entitled to both loss of opportunity damages which, based on the make good assumption, include a component of $3,956,000 and separately assessed damages for breach of the make good obligation. If there is double compensation, that would be an unjust result.
The power of the Court to reconsider a decision when the order or judgment pronounced as a result of the decision has not been authenticated is not in doubt.[8] RCA did not contend that this power did not exist, or that it should not be exercised if the Court’s reasons would lead to double compensation. For completeness, I note that the double compensation argument was not advanced at trial – a matter which may have costs consequences.
[8]See, eg, Texas Co (Australasia) Ltd v Federal Commissioner of Taxation (1940) 63 CLR 382, 457; R v Billington [1980] VR 625, 628.
Fenridge contends that it is entitled under the principal reasons to both damages for loss of opportunity, including the $3,956,000 component, and the amount determined by the special referee as the reasonable cost of performing the works required by the make good obligation; and that such a result does not amount to double compensation for breach of the make good obligation. For the reasons appearing below, I reject that contention. In my opinion, subject to some adjustments mentioned below, the Court’s assessment of Fenridge’s damages for loss of opportunity includes full compensation for all of RCA’s breaches of the lease, including its breach of the make good obligation. Accordingly, Fenridge is not entitled to a separate award of damages for that breach.
First, Fenridge acknowledged at trial that Mr Brown’s valuation needed to be adjusted, by giving credit for a number of amounts, including approximately $900,000 for the cost of undertaking works in accordance with the further works assumption. Fenridge did not, however, give credit for the costs of undertaking the make good works which Mr Brown had assumed were completed before the end of the lease at RCA’s cost. A credit for those costs was not given because Fenridge claimed that its damages for lost opportunity should be assessed on the basis that it should be placed in the same position as it would have been in if RCA had performed all of its obligations under the lease, including the make good obligation. In other words, that its damages should be assessed in accordance with the ‘ruling principle’ with respect to damages at common law for breach of contract.[9] The Court assessed damages on this basis as Fenridge contended it should do.
[9]Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272, [13] citing Robinson v Harman (1848) 1 Exch 850, 855.
Second, the overriding compensatory rule requires the Court to look at what actually happened and only compensate a wronged plaintiff for what has been lost. As the plurality stated in Haines v Bendall:[10]
The settled principle governing the assessment of compensatory damages, whether in actions of tort or contract, is that the injured party should receive compensation in a sum which, so far as money can do, will put that party in the same position as he or she would have been in if the contract had been performed or the tort had not been committed … compensation is the cardinal concept. It is the ”one principle that is absolutely firm, and which must control all else” … Cognate with this concept is the rule, described by Lord Reid in Parry v Cleaver, as universal, that a plaintiff cannot recover more than he or she has lost.[11]
[10](1991) 172 CLR 60.
[11]Ibid 63 (citations omitted).
Third, in my opinion, the make good assumption on which Mr Brown’s valuation is based has the necessary effect of compensating Fenridge for RCA’s breach of the make good obligation. It is the equivalent of assuming that, before the end of the lease: (1) RCA had paid Fenridge damages for breach of the make good obligation; and (2) Fenridge had applied the damages amount in performing the make good works which RCA had neglected to perform.
As mentioned, the effect of this determination is that some adjustment may need to be made to the $3,956,000 component of Fenridge’s damages for loss of opportunity. If the special referee determines that the scope of the make good works required under the lease is less than those works assumed in the make good assumption, then a further credit adjustment must be made against Mr Brown’s valuation for the costs of Fenridge performing additional works that are presently included in the scope of the make good assumption. In other words, the $900,000 credit for further works in paragraph [289(3)] of the principal reasons may increase, and the Court’s assessment of the $3,956,000 component of Fenridge’s lost opportunity may decrease, by an amount representing the cost of the additional works, as those works would have been required to put the nursing home premises in ‘as new’ condition, as assumed by Mr Brown.
If such an adjustment is required, RCA has signalled that it may, depending on the amount of the adjustment, wish to contend that the Court should revisit its assessment that Fenridge is entitled to 80 per cent of the full value of the relevant aspect of the lost opportunity – because the cost of the additional works may contain significant risks, justifying a lower overall assessment. Argument as to whether RCA should be entitled to re-open to raise that contention will be considered after the amount of any adjustment is determined.
Although Fenridge is not entitled to a separate damages award for breach of the make good obligation, the parties agree that there is still work for the special referee to do. Based on these reasons, the referee must determine:
(1) whether there are any items included in Fenridge’s make good claim, and assumed by Mr Brown in the make good assumption to have been performed during the lease, which RCA was not obliged to perform or was not obliged to perform to the standard claimed by Fenridge?
(2) in respect of any items of work found not to have been required to be performed by RCA, what would have been the reasonable cost of performing those works in 2008?
(3) in respect of any items of work found not to have been required to be performed by RCA to the standard claimed by Fenridge, what is the difference between the cost of performing those works to the standard claimed by Fenridge and the cost of performing them to the standard required of RCA?
Based on these reasons, it is strictly unnecessary for the referee to determine the reasonable cost in 2008 of performing the make good works which RCA was required to perform under the make good obligation, because the performance of those works at no cost to Fenridge is the subject of the make good assumption. Fenridge nevertheless seeks to have that cost determined. Having regard to the possibility of appeal, and because the referee will in any event need to determine the scope of works required by the make good obligation, the extra cost and inconvenience of costing those works should not be all that significant in the context of this proceeding. The referee should, accordingly, quantify the reasonable cost in 2008 of the works which RCA was required to perform under the make good obligation. In the absence of a referral to a special referee, the Court would make that determination so as to avoid any remitter should that be necessary as a result of an appeal.[12]
[12]See Concrete Pty Ltd v Paramatta Design & Developments Pty Ltd & Anor [2006] HCA 55, [172].
The Court notes that the parties are endeavouring to agree upon the answers to the various questions to be submitted to a special referee. In the absence of agreement, it is anticipated that there will be a mediation in relation to those questions, and perhaps more generally. Agreement or mediation of the amounts will further the overarching purpose in the Civil Procedure Act 2010 (Vic) and the Court will provide such assistance as it can to the parties in that endeavour.
SCHEDULE OF PARTIES
| S CI 2009 07142 | |
| BETWEEN: | |
| FENRIDGE PTY LTD (ACN 052 286 521) | Plaintiff |
| - and - | |
| RETIREMENT CARE AUSTRALIA (PRESTON) PTY LTD (ABN 51 113 960 946) | First Defendant |
| RCA OPERATIONS (2) PTY LTD (ABN 16 113 961 103) | Second Defendant |
| MORAN HEALTH CARE GROUP PTY LTD (ACN 008 585 242) | Third Defendant |
| GRETA MORAN (as executor of the estate of the late DOUGLAS JOHN MORAN) | Fourth Defendant |
| REGIS GROUP PTY LTD (ACN 084 720 561) | Fifth Defendant |
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