Luben Petkovski v Kai Yin Huang (No. 3)

[2019] NSWSC 1566

Supreme Court

New South Wales

Medium Neutral Citation:	Luben Petkovski v Kai Yin Huang (No. 3) [2019] NSWSC 1566
Hearing dates:	10 & 11 September 2019
Date of orders:	14 November 2019
Decision date:	14 November 2019
Jurisdiction:	Equity
Before:	Slattery J
Decision:	Conclusion that but for the first cross-defendant’s misconduct the cross-claimants would have purchased one lot and had a 30% chance of acquiring two other lots, of the three lots they did not acquire.
Catchwords:	UNCONSCIONABLE CONDUCT – causation of loss –findings in principal judgment that the defendant/first cross-claimant deprived of the opportunity to purchase three of six properties by the first cross-defendant’s misleading, deceptive and unconscionable conduct – wrongdoer deters an associate of the defendant/cross-claimants from sharing in the purchase of two of the six properties – on what basis should damages be assessed against the cross-defendants: on the basis that the cross-claimants would have purchased a single additional property or an additional three properties.   TRUSTS AND TRUSTEES – reimbursement and indemnity under Trust Deeds for trustees’ trust-related expenditure – principal judgment makes a finding that the defendants/cross-claimants are trustees for the cross-defendants in the acquisition and development of certain properties – defendants/cross-claimants seek to set aside the Trust Deeds – defendants/cross claimants claim reimbursement and indemnity under the Trust Deeds for trustees’ trust-related expenditure – whether their expenditure is recoverable.
Legislation Cited:	Competition and Consumer Act 2010 (Cth), Sch 2 - Australian Consumer Law, ss 18, 236 Property Stock and Business Agents Act 2002, s 49
Cases Cited:	Henville v Walker (2001) 206 CLR 459 Houghton v Immer (No. 55) Pty Ltd (1997) 44 NSWLR 46 Luben Petkovski v Kai Yin Huang [2018] NSWSC 1667 Luben Petkovski v Kai Yin Huang (No. 2) [2019] NSWSC 1563 Ramsay v BigTinCan Pty Ltd (2014) 101 ACSR 415 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332
Category:	Consequential orders (other than Costs)
Parties:	Luben Petkovski (first plaintiff, first cross-defendant) Diana Petkovski (second plaintiff, second cross-defendant) George Gashovski (third plaintiff, third cross-defendant) Lence Petkovski (fourth plaintiff, fourth cross-defendant) Kai Yin Huang (defendant, first cross-claimant) Xuan Jing Huang (second cross-claimant)
Representation:	Counsel: D A Moujalli (plaintiffs/cross-defendants) J S Wheelhouse SC, J E Doyon (defendant /cross-claimants)   Solicitors: Daniel William Turk, TurksLegal (plaintiffs/cross-defendants) Stanley Zi-Jun Yee, Levitt Robinson Solicitors & Attorneys (defendant/cross-claimants)
File Number(s):	2015/308860
Publication restriction:	No

Judgment

1. This is the Court’s third judgment in these proceedings. The Court's first judgment dealt with a range of disputes arising between the parties between early 2010 and mid-2012, relating to the purchase and subdivision of six properties in Rockdale, and other disputes arising between mid-2012 and 2014, about alleged trespasses and nuisances among the adjacent property owners in the subdivision: Luben Petkovski v Kai Yin Huang [2018] NSWSC 1667.

2. The Court’s second judgment dealt with the first two of four groups of issues arising from a relief hearing, following upon the Court’s first judgment: Luben Petkovski v Kai Yin Huang (No. 2) [2019] NSWSC 1563. This judgment deals with the third and fourth groups of issues considered at the relief hearing. These two remaining groups of issues are: whether there was a loss of opportunity to acquire one property, or three properties (being Claims 4 and 5 of the parties’ list of claims); and what indemnity can the Huangs claim under the Trust Deeds (being Claim 7 of the parties’ list of claims).

3. Claim 6 of the parties’ list of claims has resolved. The parties have brought in a consensus calculation for this claim, which is explained later in these reasons.

4. These reasons should be read with both the Court’s first and second judgments. Events, matters and persons are referred to in the same way in both judgments.

Was There a Loss of Opportunity to Acquire One Property, or Three Properties?

5. This group of issues comprises Claims 4 and 5 of the parties’ list of relief hearing claims. Claim 4 is the Huangs’ claim for damages under Competition and Consumer Act 2010 (Cth), Sch 2 - Australian Consumer Law (“Australian Consumer Law”), s 236 for Mr Petkovski’s contravention of Australia Consumer Law, s 20 in causing the Huangs to execute the Trust Deeds. Claim 5 is a claim for equitable compensation consequent upon Mr Petkovski’s duress and unreasonable conduct in causing the Huangs to execute the Trust Deeds. The claims represented different remedies for the same conduct.

6. The central question in this group of issues may be shortly stated. The Huangs’ principal submission is that, when the Court assesses their losses resulting from Mr Petkovski’s unconscionable conduct and contraventions of the Australian Consumer Law, the appropriate measure of their damage is the loss of opportunity to acquire the three lots (of the six), which were the subject of the Trust Deeds: Lot 1 (No.57), Lot 2(No.55) and Lot 4(No.49). The Huangs’ submit this outcome is consistent with the Court’s findings in the first judgment.

7. In reply, Mr Petkovski submits that the appropriate measure of the Huangs’ damage is the loss of only one lot, not three. Mr Petkovski submits that is consistent with the Court’s findings, which he submits were that the other two lots would have been purchased by Ms Wu, not Mr Petkovski.

8. These competing contentions were supported by detailed analysis on each side. The parties’ analysis often referred to the Court’s findings in the first judgment. Central to the present contest are the Court’s conclusions at paragraphs [403] to [411], [413] and [414] of the first judgment, where the Court said:

“[403]   The Court has found that Mr Petkovski engaged in unconscionable conduct and applied illegitimate pressure amounting to economic duress to the Huangs, causing their entry into the Trust Deeds and then the Option Agreements to acquire three lots of the Watkin Street property (Lot 1 (No. 57), Lot 3 (No. 53), and Lot 4 (No. 51)) on disadvantageous terms, requiring their transfer to the Petkovski parties.

[404]   Mr and Mrs Huang say that, as a result, they lost the opportunity to purchase the Watkin Street property as a whole, or as subdivided into six lots.

[405]   Had the unconscionable conduct not occurred, the most likely alternative scenario is one in which Mr Petkovski did not contravene PSBA Act, s 49 and no Petkovski parties bid for the Watkin Street property. There is no evidence they would have done so. Indeed, the terms of the Trust Deeds suggest their only interest in these properties was to access some of the lots without increasing their price beyond what the Huangs were paying.

[406]   The Court infers that Mr Huang could have purchased Lot 1 (No. 57) because he had cash in the bank as at 29 June 2011 of some $324,000. This would not have been a difficult acquisition for him. The only real question in the case whether he could have purchased the properties that Ms Wu was originally going to take.

[407]   The Court infers that, without the unconscionable conduct, Mr and Mrs Huang would have become the purchasers of at least four of the six lots in DP1/536641; all six lots would have been purchased from Pangani at the price of $3.15 million; Mr Huang and Ms Wu would have become the registered proprietors of all six lots from July 2012 onwards; that if Ms Wu had not proceeded to purchase her two lots, the Huangs would, in those circumstances, have acquired all six lots from July 2012; and Mr and Mrs Huang had the financial capacity to buy all three remaining properties of the Watkin Street property at $525,000 each.

[408]   Without Mr Petkovski’s unconscionable conduct, it is probable that Ms Wu would have purchased her two lots. This counter factual needs a little explanation. Ms Wu’s abandoning of the two properties that she and Mr Huang had agreed that she could have is wholly to be explained by Mr Petkovski’s pressure. If it be assumed that Mr Petkovski did not press his scheme to purchase some of the properties behind the back of the vendor, then there would be no reason for him to apply any pressure to Ms Wu. And she is likely to have been the purchaser of two of the lots.

[409]   Ms Wu had the capacity to purchase the other two lots. She said under cross-examination that she went to Westpac and obtained a loan to acquire the two lots in her name without difficulty. The Court accepts that evidence.

[410]   But Ms Wu was always obtaining her lots as a result of Mr Huang’s goodwill. There was no formal legally binding agreement between Ms Wu and Mr and Mrs Huang. He was clearly the gateway through which her purchase would proceed. But there was a high probability, in my view, having seen Ms Wu, that it would have proceeded in her name.

[411]   There is, of course, an ill-defined possibility that she may not have proceeded, in which case, in my view, it is certain that Mr Huang would then have taken up these two lots for himself and his wife. How this counter factual unfolds in terms of possible damages is a matter for the damages and relief hearing.

…

[413] On the basis of these causal findings, each of Mr and Mrs Huang will seek to assess ACL, s 236 damages and equitable compensation, resulting from the established contraventions of ACL, s 20.

[414]   What is the correct measure of damages for this identified loss to the Huangs will become the subject of a separate damages hearing, which may include, for example, the adducing of expert evidence. The Court will make directions to facilitate the conduct of that hearing.”

9. Other parts of the Court’s first judgment are referred to in the analysis within each of the parties’ submissions. These reasons now turn to an examination of those submissions, issue by issue.

The Huangs’ Submissions – Loss of Opportunity to Acquire Three Properties

10. The Huangs’ submissions on damages analyse this matter as a loss of opportunity case. They say that they have established on the balance of probabilities that, through Mr Petkovski’s conduct, they have lost the benefit of acquiring at least the one lot which Ms Wu had no desire to buy. They say that they pass the Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; (1994) 120 ALR 16; [1994] HCA 4 (“Sellars”) threshold of establishing on the balance of probabilities that some loss occurred and that whether or not they would have obtained the other two lots should now be assessed as a lost opportunity. But in making that assessment, they say that the lost opportunity should be assessed as a certainty, namely a 100% probability that they, rather than Ms Wu, would have acquired the other two lots.

11. The Huangs then develop their argument by reference to the Court’s existing findings. The Huangs first submit that, but for the issue of what lots Ms Wu might have purchased, the Court has already clearly found: first, that the Huangs would have purchased six lots; secondly, that they had the financial capacity to do so; and thirdly, that they were deprived of three lots by Mr Petkovski’s conduct.

12. In my view, these three preliminary propositions are established in the Court’s existing findings. As the Huangs point out, the first two propositions are established by the Court’s findings in the first judgment, (at [407]).

13. The Huangs submit, and the Court accepts, that the third proposition is also made out from the Court’s findings in its first judgment, (at [352]), that: the three Trust Deeds were “disadvantageous transactions” in which the Huangs entered “by reason of Mr Petkovski’s unconscionable conduct and were the vehicle by which the Huangs lost the value of the subsequent Option Agreements over the three lots”. The Court also found, (at [352]), that: “the loss to the Huangs is measured by the lost opportunity to enter into option agreements unfettered by the obligations of the Trust Deeds.” The Huangs also point to the Court’s finding, (at [355]), that: “the Trust Deeds virtually gifted the three lots to the first cross defendant and his associates”.

14. These three fundamental matters are established. The Huangs’ next and central contention is that when the exact sequence of events involving Ms Wu is analysed in detail, it can be seen that the Court’s first judgment findings that Ms Wu’s willingness to buy two of the six properties, (at [408]), and her capacity to do so, (at [409]), are not an obstacle to the Huangs recovering damages for the loss of opportunity to purchase three properties. The Huangs contend that this conclusion flows from analysis of the exact sequence of events in March/April 2011 involving Mr Petkovski, Ms Wu and Mr Huang.

15. Ms Wu decided on 23 February 2011 not to proceed to acquire the two properties earmarked for her. But Mr Huang was not forced to enter into the Option Deeds until 10 March 2011. The Huangs’ submit that this gap is of critical importance in analysing the counterfactuals. They submit that Ms Wu had become disillusioned with Mr Petkovski and decided to exit this potential investment altogether; well over two weeks before Mr Petkovski forced the Trust Deeds on Mr Huang. As Mr Wheelhouse SC, counsel for the Huangs, put it in oral submissions, Ms Wu had “had enough of Mr Petkovski and all his carrying on”. He submitted that the loss of opportunity to purchase six lots, rather than a lesser number, crystallised on 10 March 2011 upon the Huangs’ signature on the Trust Deeds. But the Huangs submit that at that very moment Ms Wu was not only not “on the scene” but critically had decisively indicated her lack of interest in proceeding further, and had not been around for over two weeks.

16. Combined with Ms Wu’s departure, the Huangs submit that the Court’s findings in the first judgment, (at [189]), show: (1) their determination, immediately before entry into the Option Deeds, to proceed without Ms Wu; and (2) Mr Petkovski’s independent and later refusal to allow them to proceed to acquire the other three properties, even after Ms Wu was gone.

17. In my view, there is substance in this submission. The first judgment, (at [189] to [191]), shows just this:

“[189]   Shortly after, Mr Huang rang Mr Petkovski, who immediately demanded the property Ms Wu was abandoning:

Mr Petkovski:   ‘I want the rest of the properties if Wu isn't going to buy them’.

Mr Huang:   ‘No. I want the rest of the properties if Wu isn't going to buy them.’

Mr Petkovski:   ‘No, you won't. I told you I want to buy them’.

Mr Petkovski:   ‘Johnny I have documents in my office for you to sign. Can you come to my office with your wife and sign them?’

[190]   About this time, Mr Petkovski introduced the need for the Huangs to sign the Trust Deeds. He said to Mr Huang that, “If you don’t sign the [the Trust Deeds] with us, I will not provide you with the contracts for the six lots or any refund of the deposit.”

[191]   Mr Petkovski’s views prevailed. He had the power to deny any deal to Mr Huang to purchase the Watkin Street property and he used it.”

18. It is quite clear from the findings that Mr Huang was asking for the lots that Ms Wu no longer wanted and Mr Petkovski was refusing to make them available; “No you cannot have them”, he said.

19. The Huangs submit that the findings, such as those at [189] in the first judgment, entitled the Court to infer that had the Trust Deeds not been imposed on the Huangs there was a 100% possibility (namely a certainty) that the Huangs would have purchased all six lots, once the vendors made available the Option Agreements. And as the Court has already found, (first judgment at [8]), that Mr Petkovski engineered the situation in which those Option Agreements would not be made available to the Huangs until some little time after they had been forced to sign the Trust Deeds.

20. The Huangs emphasise that when the Court comes to assess the value of the lost opportunity, it is important to focus on the time that this opportunity disappeared and not some other point of time. And they submit that point of time is 10 March 2011 upon execution of the Trust Deeds, after Ms Wu had left the scene.

Mr Petkovski’s Submissions - Loss of Opportunity to Acquire Only 1 Property

21. Mr Henry SC’s primary submission on behalf of Mr Petkovski is that it is not now open to the Court, given its existing findings, to conclude that, absent Mr Petkovski’s unconscionable conduct, Ms Wu would not have purchased two properties of the three properties that Mr Huang was prevented from acquiring.

22. Mr Henry SC’s second submission is that Mr Wheelhouse SC’s reliance upon the loss of opportunity crystallising at a particular point of time, on 10 March 2011, and the gap between that time and Ms Wu’s departure some weeks earlier (she having been deterred to leave the transaction by Mr Petkowski’s conduct), does not allow the Court to conclude directly that the Huangs would have purchased all three lots without Ms Wu. The submission is that the question for damages is ultimately one of assessing what loss was caused by the unconscionable conduct. The real question is the broader one of what would have happened but for the unconscionable conduct; that is, what would have happened in the counterfactual. And when making that assessment, the Court’s existing findings confine the scope of what can now be concluded now. Mr Henry SC developed these arguments by reference to the Court’s existing findings.

23. The submissions on behalf of Mr Petkovski commence analysis of the facts and findings at an early point of time in the narrative of this development. Mr Henry SC took the Court to the findings in paragraph [90] of the first judgment relating to a point as early as April 2010: “The Court infers that [Mr Huang] wanted to purchase the whole site, subject to sharing two lots with Ms Wu”. And the Court’s own findings are that April 2010 is when Ms Wu first became involved: first judgment at [85] – [87].

24. Mr Henry SC then took the Court to findings in the first judgment, (at [99]), recording the agreement between Mr Huang and Ms Wu. The agreement was, as the finding records, that: “Mr Huang and Ms Wu agreed that Mr Huang would receive four houses of the six in the Watkin Street property and that Ms Wu would receive two houses.”

25. Mr Henry SC then took the Court to paragraph [100] of the first judgment showing the relative consideration being provided by Mr Huang and Ms Wu pursuant to their agreement to share lots; he to take four, and she to take two. Paragraph [109] of the first judgment records a finding that Ms Wu reimbursed Mr Huang on account of her contribution towards expenses that he had outlaid on her behalf, related to the purchase of her two houses. The total sum she paid was $50,834 that was paid through a number of instalments.

26. Mr Henry SC then took the Court to paragraphs [100], [119] and [121] of the first judgment, which deal with the specific agreements that Mr Huang and Ms Wu made in about June 2010 about the particular lots that each was going to acquire. These paragraphs provide as follows:

“[119]   The vendor’s decision to shift to responsibility for the subdivision to the purchasers focussed Mr Huang’s and Ms Wu’s minds about which of the six properties each of them was to get and in what proportions and with what co-purchasers. By about 22 or 23 June 2010, they had reached agreement to lodge the subdivision plan themselves and had settled on the title particulars of all six lots post subdivision. They were made aware of the extra cost involved for them in subdividing. But provided they had extra time to complete, they were prepared to subdivide themselves.

[120]   They agreed that the properties would be held as follows: Lot 1 (No. 57) by Hua Tang (Ms Wu’s son) (95%) and Ms Wu (5%) as tenants in common; Lot 2 (No. 55) by Ms Wu (95%) and Hua Tang (5%) as tenants in common; Lot 3 (No. 53) by Mr and Ms Huang; Lot 4 (No. 51) by Mr and Mrs Huang; Lot 5 (No. 49) by Mr and Ms Huang; and Lot 6 (No. 47) by Mr and Mrs Huang.

[121]   Subsequent events meant that the Watkin Street property sale did not proceed in this way. But the extent of this agreement reached this early between Mr Huang and Ms Wu shows their mutual commitment to proceed: Mr Huang deciding to purchase with his wife in equal shares, and Ms Wu deciding to purchase with her son in a very specific ratio.”

27. There is no doubt, as Mr Henry SC submits, that the Court has found that Ms Wu had well-developed plans for how she was going to acquire the two lots that she had earmarked for herself. And as the Court found in the first judgment, (at [142] and [147]), Ms Wu’s plans were sufficiently well-developed after Mr Petkovski’s initial unconscionable conduct; through his demand in November 2010, Ms Wu and Mr Huang compromised to save the purchase: “She agreed to forego one lot and he agreed to forego the other”. This had the result that, by December 2010, Mr Huang and Ms Wu had agreed that Mr Huang would be buying three properties and Ms Wu one property.

28. A series of findings are highlighted by Mr Henry SC about why Ms Wu pulled out of the Watkins Street purchases altogether in February 2011. Mr Wheelhouse SC’s submissions had already mentioned some of these in his submissions and these have been identified above. But the ones raised by Mr Henry SC are also significant to the Court’s ultimate analysis on this issue. These are detailed below.

29. Ms Wu’s withdrawal was precipitated by a meeting that she had with Mr Petkovski in his office on 23 February 2011. The Court’s findings, (at [186] to [188]) of the first judgment, about that meeting are set out below:

“[186]   On about 23 February 2011, Ms Wu met Mr Petkovski in his office. She asked him for a copy of any proposed contract or option agreement with the vendor. She was concerned about the lack of progress with the subdivision. They had a conversation to the following effect:

Ms Wu: ‘According to the letter dated 25 May 2010 your company agreed that the time for registration of subdivision plan is 13 November 2010. Three months have passed and the subdivision plan is still not completed. Perhaps you can tell me the completion date of the subdivision plan or another alternative is that you give me a contract with the six lots under the same title.’

Mr Petkovski:    ‘Sorry I can do neither, but if you insist you could consider giving up and I will return your deposit.’

[187]   Ms Wu says she was unhappy about this. She thought she should either have a commitment as to when the subdivision should be completed or she and Mr Huang should have the whole title conveyed to them. She felt cheated by Mr Petkovski’s stonewalling. So, she decided to accept back her deposit amount of $50,834.00 from Mr Petkovski and not proceed with the purchase.

[188]   On 25 February 2011, Ms Wu called Mr Huang and told him, “I have forgone the second lot.” This was her last remaining interest in the Watkin Street property. Her exit from the purchase left a vacuum – a spare lot for purchase – that Mr Petkovski quickly moved to fill with another purchaser.

30. These findings record that Ms Wu was certainly unhappy with Mr Petkovski’s conduct towards her up till that point of time; a matter of some significance to be considered when evaluating causal issues in this matter.

31. Mr Henry SC then emphasises the continuous nature of Mr Petkovski’s scheme, as found by the Court in the first judgment, (at [350] and [351]):

“[350]   All the elements were in place by November 2010 for Mr Petkovski to take unconscionable advantage of the Huangs. By then, they were in a position of special disadvantage vis-à-vis Mr Petkovski. He was aware of their special disadvantage and he exploited it.

[351]   In November 2010, Mr Petkovski first raised the idea of his taking an interest in the Watkin Street property. Through a series of steps between November 2010 and March 2011, Mr Petkovski put himself in a position to maximise the benefit he would derive from his position of knowledge of Mr and Mrs Huang’s position of special disadvantage. He ultimately achieved his objective in March 2011 by orchestrating their execution of the Trust Deeds, followed shortly afterwards by the Option Agreements. The Rescission Deeds, which were signed 12 months later in May 2013 after exercise of the options, added little to his previous unconscionable conduct. They were really only its logical working through.”

32. Mr Henry submits that these passages in the Court’s findings show that Mr Petkovski was engaged upon a continuum of conduct with an objective that ended up being achieved, in which the Court found to be unconscionable. He submits that Ms Wu’s withdrawal is right in the middle of the continuum and, because of the continuum, it is not appropriate to draw inferences from narrow periods of time as Mr Wheelhouse SC submits.

33. Mr Henry SC further submits that the Court’s findings, (at [369] to [374]) of the first judgment, of Mr Petkovski’s final push to get the last property that Ms Wu had abandoned are significant. Those findings are as follows:

“[369]   The Exploitation. How did Mr Petkovski exploit the Huangs’ position of special disadvantage? He did so using his unique position and knowledge. By November 2010, Mr Petkovski had unique access to information about the potential sale of the Watkin Street property: (1) he knew the price and terms on which Pangani would offer the property for sale; (2) he knew he was Mr Huang’s sole practical channel of communication to the directors of Pangani; (3) he knew that Mr Huang had paid a deposit of $152,500.00 to secure the purchase of the Watkin Street property and that Mr Huang feared losing his deposit if the purchase did not proceed; (4) he knew the approximate cost of the subdivisional work carried out by Mr Fandakis on behalf of Pangani; (5) he knew the detail of the separate agreement between Mr Huang and Ms Wu, for Ms Wu to purchase two of six lots if the Watkin Street property were subdivided; and (6) he knew Mr Huang placed trust in him in relation to technical real estate issues involved in the possible purchase of the Watkin Street property.

[370]   In November 2010, Mr Petkovski asked for two of the six lots. He deliberately withheld giving instructions for the release of the contracts for exchange, until he got an answer from Mr Huang that suited him. He threatened Mr Huang that he would withhold the issue of the contracts unless he got his way. He held loss of the deposit over the Huangs. He also threatened, in the owner’s name, to exclude Ms Wu from the purchase.

[371]   Mr Petkovski’s substantial power of threat was demonstrated within the month. After the conversations in November 2010, Mr Petkovski and Ms Wu agreed that an unnamed buyer related to Mr Petkovski would purchase Lot 4 (No. 51) and Lot 3 (No. 53).

[372]   By late February 2011, Ms Wu informed Mr Huang she did not wish to proceed with the purchase of any lot. Her withdrawal was itself the product of Mr Petkovski’s pressure.

[373]   Mr Petkovski then increased his demands. He wanted one more property, Ms Wu’s last property, this time for Ms Elfes. In order to get it, Mr Petkovski again threatened Mr Huang in January 2011 with not issuing any contracts and with loss of his deposit unless he abandoned any claim to Ms Wu’s second property and signed the Trust Deeds.

[374]   Mr Petkovski’s actions and statements prior to 10 March 2011 made Mr Huang (and through him, Mrs Huang) believe that if they wished to purchase any lots and not risk losing the deposit, they had no choice but to execute the Trust Deeds in respect of Lot 1 (No. 57), Lot 3 (No. 53) and Lot 4 (No. 51).”

34. Mr Henry SC further submits that there is an important link in Mr Petkovski’s unconscionable conduct towards Mr Huang and Ms Wu: it is the same unconscionable conduct that led to Ms Wu withdrawing that also led to Mr Huang having to give up three lots. He says that some of the unconscionable conduct recorded by the Court against Mr Petkovski (the guarantee that the beneficiaries would pay Mr Huang the money they would owe under the Trust Deeds) occurred on 24 February 2011: see the first judgment at [377].

35. Though this is strictly true, by the time this statement was made by Mr Petkovski to Mr Huang, it is clear in the Court’s findings that Mr Petkovski knew that Ms Wu was not going to stay involved in the transaction as she had already told him on 23 February 2011 that she was not proceeding. Mr Henry SC submits that this shows the continuous nature of Mr Petkovski’s conduct, and that Ms Wu’s departure is embedded in the middle of it, but the timing of her departure is not significant.

36. Mr Henry SC then takes the Court back to the important passages set out earlier in this judgment. He emphasises the findings in [407] of the first judgment that Mr and Mrs Huang would have become the purchasers of at least four of the six lots. He submits this makes any conclusion that Mr Huang would have acquired more than four lots unavailable on the Court’s existing findings. He also relies upon the finding, (at [408]), that without Mr Petkovski’s unconscionable conduct “it is probable that Ms Wu would have purchased her two lots.”

37. At this point in the submissions, the Court engaged in argument with Mr Henry SC on the question of what is the correct counterfactual here – an important question. The Court identified a possible counterfactual combination that had not been dealt with in the first judgment. The Court asked whether or not a finding is now open that Mr Petkovski behaved unconscionably towards Ms Wu in the way that the Court found that he did towards her, but that he was nevertheless not guilty of any unconscionable conduct towards Mr Huang.

38. Mr Henry SC’s response to this question is that such a hypothesis was not open on the Court’s existing findings. He places particular emphasis on the last two sentences of [408] of the first judgment and says that, because the unconscionable conduct was a continuum, it is difficult to assume any counterfactual in which if pressure were not applied to Mr Huang, it would also not have been applied to Ms Wu. And he emphasises, based on [412] in the first judgment, that these are all causal findings.

39. Mr Henry SC notes that Mr Petkovski introduced the idea of the Trust Deeds to Mr Huang as early as December 2010, long before Ms Wu departed: first judgment at [151]. He also submitted that the operative factors that Mr Petkovski used to force Mr Huang to sign the Trust Deeds, in March 2011 (first judgment at [194]), were influences that had long predated Ms Wu’s decision not to proceeds namely: Mr Petkovski “told them to do so”; that if Mr Huang did not sign the Trust Deeds he would be denied the opportunity to buy any part of the Watkin Street property; and that Mr Huang would lose his deposit if he did not sign. Once again, Mr Henry SC emphasises the Court’s findings as to the continuous nature of Mr Petkovski’s scheme of misconduct.

40. In short, Mr Henry SC submits that the conclusions for which Mr Wheelhouse SC contends are not open and that the Court should recognise Mr Petkovski’s conduct for what it was: a scheme which encompassed everything that he had done to both the Huangs and Ms Wu. As a result, he submits, the Court should assess this case on the basis that the Huangs have lost the benefit of only one property due to Mr Petkovski’s unconscionable conduct, because the probable alternative was no unconscionable conduct towards either of them.

41. And Mr Henry SC says that even if one assumes that Mr Huang acquired all of the six properties from the vendor, there is a serious probability, even on that counterfactual, that Mr Huang would have offered Ms Wu two of the properties to which he was entitled, on the basis that he would have felt morally obliged to honour his previous arrangement with her.

42. Citing passages in Sellars at p 343, 345 and 353, Mr Henry SC submits that the Huangs may have established on the balance of probabilities that they have lost the opportunity to acquire one lot in Watkins Street. But because the Court has found that Ms Wu was likely to have acquired two of the three lots the Huangs did not acquire, they cannot establish on the balance of probabilities that they suffered a loss of opportunity to acquire anything more than compensation for the loss of one lot.

43. Mr Wheelhouse SC’s reply to these submissions is taken into account in the Court’s analysis below.

Analysis

44. Should Sellars’ methodology be applied here? The case was argued on both sides, on the basis that it was a loss of opportunity case. The Huangs accepted the burden of establishing that the Sellars test had to be satisfied in order for damages to be recovered. And Mr Petkovski contested that it had been satisfied.

45. Alternative ways of looking at causation in equity for equitable compensation were discussed but argument was not addressed to suggest that the Court should approach the assessment other than substantially in accordance with Sellars.

46. Mr Wheelhouse SC did submit on behalf of the Huangs that, based on cases such as Ramsay v BigTinCan Pty Ltd (2014) 101 ACSR 415; [2014] NSWCA 324 (“BigTinCan”), Mr Petkovski’s conduct had caused a loss of opportunity and that loss had a particular value, the assessment of which could be approached robustly as the justice of the case required. 

47. Mr Henry SC pointed out that cases such as BigTinCan involved breaches of fiduciary duty, which are not present here. He submitted that for this reason the authority of such decisions is of a limited value.

48. But in my view, the assessment of damages here should be approached robustly. Such a robust approach is justified by decisions such as Houghton v Immer (No. 55) Pty Ltd (1997) 44 NSWLR 46, a case assessing equitable compensation for the commission of an equitable fraud but in the absence of any breach of fiduciary duty. There Handley JA said, (at [59]):

“In my judgment the Court should assess the compensation in a robust manner, relying upon the presumption against wrongdoers, the onus of proof, and resolving doubtful questions against the party ‘whose actions have made an accurate determination so problematic’: see LJ P Investments Pty Ltd v Howard Chia Investments Pty Ltd (1990) 24 NSWLR 499 at 508.”

49. That being said, all sides accepted this is a loss of opportunity case. So some methodology must be applied to value the lost opportunity. The parties accepted that Sellars was an appropriate assessment methodology here. For the Australian Consumer Law, s 236 claim, this is consistent with the principle that the Court should select a measure of damages that conforms to the remedial purpose of the statute, and the justice and equity of the case: Henville v Walker (2001) 206 CLR 459; (2001) 182 ALR 37; [2001] HCA 52.

50. Mr Petkovski’s position was that Sellars was not satisfied in this case, and did not show that the Huangs had suffered a loss of more than one lot. The Huangs submitted that Sellars was satisfied and they had shown a loss of opportunity to acquire three lots. The Court will approach the assessment of this claim in a way that both parties framed it.

51. Applying the Sellars test. The starting point for analysis is the classic passage in Sellars itself (at p355), which provides as follows:

“39.   On the other hand, the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. It is no answer to that way of viewing an applicant's case to say that the commercial opportunity was valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable.”

52. The emphasis in the original text is that “the applicant must prove on the balance of probabilities that he or she has suffered some loss or damage”. Proving that some loss was sustained is achieved by demonstrating that the contravening conduct complained of “causes the loss of a commercial opportunity which had some value”.

53. If the Huangs’ case is to be approached as a claim for the loss of an opportunity, it should be approached the way it was argued: as a claim for the loss of an opportunity to acquire three lots. In my view, Mr Petkovski’s present argument overlooks that if this claim is to be assessed as a loss of opportunity case, then the loss of the opportunity to acquire at least one lot has readily been established. That some loss or damage was therefore sustained by the Huangs due to Mr Petkovski’s contravening conduct, is clear on the balance of probabilities.

54. The Huangs have shown that they have suffered some loss, as Sellars requires, because they have demonstrated that the contravening conduct caused the loss of a commercial opportunity which had some value, not negligible value: they have suffered the loss of an opportunity to acquire at least one lot. Once the Huangs have passed that threshold - of the probability of sustaining some loss - as they have, when it comes to valuing their overall lost opportunity, it is legitimate for the Court to attempt to value any overall lost opportunity they suffered from their failure to acquire the other lots. After all, Mr Huang came to the purchase of the Watkin Street property as a package of multiple lots.

55. And this analysis is open on the first judgment. There the Court left open the possibility of the kind of assessment which the Huangs are now seeking for the Court to undertake: the valuation of a lost opportunity. When in the first judgment the Court referred (at [411]) to “an ill-defined possibility that [Ms Wu] may not have proceeded”, the Court identified that the parties had not by that time joined issue on the detail of the contest about the circumstances in which Ms Wu would not have proceeded absent Mr Petkovski’s misconduct, the Court having found (at [410]) that there was a “high probability she would have proceeded”. The Court invited greater elaboration of this contest at the damages hearing, saying: “how this counterfactual unfolds in terms of possible damages is a matter for the damages and relief hearing”. One conclusion which the Court also injected at that time was the fact that “it is certain that Mr Huang would then have it taken up these two lots for himself and his wife”, if Ms Wu did not proceed.

56. Other passages in the first judgment containing findings about Ms Wu should be read in in the light of the Court’s reservation (at [411]) of this issue for future consideration. As can be seen in the summary of his submissions above, Mr Henry SC, referred to a number of places in which he contended the Court had made findings which now preclude the Court finding that the Huangs would have acquired more than one lot, had the Australian Consumer Law contraventions or the unconscionable conduct not occurred. In my view, the Court is not confined in the manner that Mr Henry SC contends. It is open for this Court now to consider the possibility that Mr and Mrs Huang would have acquired more than one lot, despite the high probability that Ms Wu would have acquired her two lots.

57. What is the right counterfactual? But how should the opportunity of the Huangs obtaining more than one lot be valued? The parties were at issue about what assumption should be made about whether Ms Wu would have withdrawn from the transaction. The contest really comes down to this. On the Court’s findings, Ms Wu was deterred by much the same unconscionable conduct that Mr Petkovski directed at Mr Huang. But what assumptions does one make in the counterfactual? If one assumes in the counterfactual that Mr Petkovski conducted himself unconscionably neither towards Mr Huang nor towards Ms Wu, then the inference is open that she would not have been deterred from proceeding on 25 February 2011, and instead would have acquired two lots (“the primary counterfactual”). But if, on the other hand, the counterfactual assumes that Mr Petkovski did not conduct himself unconscionably towards Mr Huang, but nevertheless did conduct himself in the way that he did towards Ms Wu, then the inference is open that she would have pulled out of the transaction about the time that she did, allowing him to acquire three lots (“the alternative counterfactual”).

52. Mr Wheelhouse SC’s submissions in substance adopt the alternative counterfactual. They assume that Ms Wu was deterred by Mr Petkovski’s unconscionable conduct to leave the transaction by 25 February 2011, and that Mr Huang and his wife were not forced to sign the Trust Deed on 10 March. But is this alternative counterfactual available?

53. The answer to this is to examine what is the most probable counterfactual. The finding the Court has already made in the first judgment, (at [405]), about the most probable alternative is: that “the most likely scenario is one in which Mr Petkovski did not contravene the PSBA Act, s 49 and no Petkovski parties bid for the Watkins Street property.” If there was no pressure from Mr Petkovski to advance his own interests and those of his relatives, he would not have been so demanding, either with Mr Huang or Ms Wu. And she is far more likely therefore to have stayed in the transaction and purchased her two lots. Thus the alternative counterfactual in which somehow Mr Huang was not deterred by any scheme of unconscionable conduct on Mr Petkovski’s part but Ms Wu somehow was deterred by such a scheme is difficult to postulate and, in my view, is improbable.

54. Examining the primary counterfactual. But that is not to say that absent Mr Petkovski’s unconscionable scheme, Ms Wu would have certainly stayed in the transaction. This is because of Ms Wu’s personality and preferences. The Court has made positive findings about her in the first judgment, as follows:

“[46]   Mrs Judy Wu also was an excellent witness. She had migrated from China in December 1989, barely six months after the Tiananmen Square massacres. For a period, she had a personal financial interest in the acquisition of the Watkin Street property. Therefore, she was very focussed upon the disputed events to which she was a witness. Her memory was sharply concentrated on what was said to her. The Court assesses her as a witness of substantial truth. Again, as with Mr Xu, she was not strongly cross-examined to suggest that her evidence may either be inaccurate or biased.”

61. Ms Wu was an impressive witness who was bound by a sense of honour to Mr Huang. Despite the difficulties in assessing the character of someone through an interpreter, her outlook on business matters came across well. Her decision to exit this transaction on 25 February 2019 is not entirely surprising. She was someone who was not prepared to tolerate people that she did not trust, or who were pressuring her, or who were behaving poorly. She said at one point, in her evidence, “you know I only pay attention to my own financial affairs”. She was careful with her money and was unlikely to deal very long with someone who she felt she could not trust. She knew she could trust Mr Huang. But he was not the only person she had to deal with here. The whole scheme depended closely on trusting Mr Petkovski to deliver a myriad of detailed matters.

62. Mr Petkovski was the kind of person with whom some kind of relationship-failure with Ms Wu was a realistic possibility. The evidence in this case shows Mr Petkovski was someone with whom Ms Wu was likely to have distrusted at some point in what was not a straight-forward coneyancing transaction. His capacity to create and execute the complex scheme of unconscionable conduct, which is the subject of the Court’s findings in the first judgment, shows his general character clearly. There was risk in a complex scheme such as this for Ms Wu to have had other differences with Mr Petkovski than the one she did.

63. For the primary counterfactual, one can assume that Mr Petkovski did not engage in any unconscionable conduct. But one does not have to assume he changed his personality. The probabilities should still be assessed the way he was. Despite her loyalty to Mr Huang, and despite her commercial interest in acquiring these two properties, Ms Wu’s honesty and financial conservatism would not have allowed her to risk continuing to transact with Mr Petkovski, if she began to suspect that she could not trust him.

64. The Court has now been asked to consider more closely what the first judgment called an “ill-defined possibility”. There was, in my view, some chance that Ms Wu would not have proceeded because of other conflicts with Mr Petkovski. The Court assesses the prospect of such conflict between her and Mr Petkovski, in any event, as approximately 30%. That is, if Ms Wu had not left the transaction for the reason she did, and absent Mr Petkovski propounding the unconscionable scheme that he was propounding, there was still a 30% chance she would have abandoned this transaction. But the probabilities (at 70%) clearly were that she would have proceeded.

65. On the primary counterfactual, were Wu-Petkovski conflicts to have come to the surface and Ms Wu had pulled out as a result, the Huangs would still have had the opportunity to purchase the other two lots, notwithstanding an assumption of no unconscionable scheme on Mr Petkovski’s part. But when the Court assesses the value of that opportunity there are still other vicissitudes to be brought to account. To value the lost opportunity the Court must, for example, also assess the probability of the Huangs actually completing the contracts for the purchase of the further two lots. The Court should assess the prospect of the Huangs acquiring an additional two lots at 30%, subject to those vicissitudes, which are discussed in the next section.

66. It is not necessary on the primary counterfactual to speculate on the various hypothetical scenarios that would have led to Ms Wu not proceeding with the transaction. But the Court’s findings in the first judgment (at [187]) indicate that her dissatisfaction with unexplained delay on the vendor’s side would provide one realistic scenario that might drive her away from this transaction.

67. Which lots would the Huangs have acquired and completed? Mr Henry SC has been successful in persuading the Court that the primary counterfactual is applicable, rather than the alternative counterfactual. But the Court has found that, even on the primary counterfactual, the Huangs would have acquired one more property out of the six, and had a 30% chance of the other two properties being available for the Huangs’ purchase as well.

68. Questions now arise whether it can be determined which additional property would the Huangs have acquired, and then which are the two other properties that they also had a 30% chance of acquiring upon Ms Wu dropping out, subject to any further vicissitudes associated with completion. These questions arise, because in the end the Huangs acquired one of the two properties that Ms Wu was originally going to acquire, namely Lot 2(No 55). And of the three properties that the Petkovski’s ultimately acquired Lot 1(No 57), Lot 3(No 53) and Lot 4(No 51), each has the same purchase price in 2011 but a different market value now. So the damages flowing from the Huangs’ loss of each one would be differently calculated, depending on which one was the first lot foregone by the Huangs and which ones had a 30% chance of otherwise becoming available to the Huangs. The differences in the respective current values of these properties are set out in following paragraphs.

69. Lot 1(No 51). The Huangs’ valuer ascribes current unimproved value of $1,110,000.00 to this property. The Petkovski valuer ascribes current unimproved value of $1,080,000.00. The average value is $1,095,000.00. It appears the parties are in agreement that the capital gain should then be calculated as follows:

1. Current average value:       $1,095,000.00.

2. Purchase price in 2012:       $525,000.00.

3. Conveyancing costs in 2012:    $1,342.00.

4. Stamp duty in 2012:       $19,115.00.

5. Land tax from July 2012 to date:    $64,016.54.

70. Therefore, the claimed capital gain on No 57 Watkin Street is $485,526.46 (being Items 1 less 2 less 3 less 4 less 5).

71. Lot 3(No 53). The Huangs’ valuer ascribes a current unimproved value of $1,025,000.00 to this property. The Petkovski valuer ascribes current unimproved value of $1,025,000.00. The value can therefore be agreed at $1,025,000.00. It appears the parties are in agreement that the capital gain should then be calculated as follows:

1. Current value:          $1,025,000.00.

2. Purchase price in 2012:       $525,000.00.

3. Conveyancing costs in 2012:    $1,342.00.

4. Stamp duty in 2012:       $19,115.00.

5. Land tax from July 2012 to date:    $61,255.73.

72. Therefore, the claimed capital gain on No 53 Watkin Street is $418,287.27 (being Items 1 less 2 less 3 less 4 less 5).

73. Lot 4(No 51). The Huangs’ valuer ascribes current unimproved value of $875,000.00 to this property. The Petkovski valuer ascribes current unimproved value of $950,000.00. The average value is $912,500.00. It appears the parties are in agreement that the capital gain should then be calculated as follows:

1. Current average value:       $912,500.00.

2. Purchase price in 2012:       $525,000.00.

3. Conveyancing costs in 2012:    $1,342.00.

4. Stamp duty in 2012:       $19,115.00.

5. Land tax from July 2012 to date:    $61,255.73.

74. Therefore, the claimed capital gain on No 51 Watkin Street is $305,787.27 being Items 1 less 2 less 3 less 4 less 5).

75. At least the parties agreed on the arithmetic of certain loss calculaions about these properties.

76. And an agreement between the parties simplified the calculations. The parties agreed to exclude rent and interest from the calculations which were therefore limited to the differences between the capital values of the properties upon acquisition, and at the time of the hearing. This was a convenient and practical compromise. The Huangs had sought to claim the loss of opportunity to earn rent over the three properties. Mr Petkovski had countered with a contention that the Huangs should bring to account the interest costs of holding the properties to earn that rent. It was decided in the end on both sides to exclude both this claimed recurrent income and expenditure from the calculation. The Court can now proceed to the calculations for the individual lots.

77. Mr Henry SC submits that the Huangs would never have acquired Lot 1(No 57), because Lot 1(No 57) and Lot 2(No 55) were the two properties Mr Huang had agreed for Ms Wu to take. He submits Lot 1(No 57) can be put aside for the purposes of the damages calculations.

78. Mr Henry SC submits that the way that the Huangs’ loss should be calculated is therefore as follows. He submits that because the Huangs would never have acquired Lot 1(No 57) or Lot 2(No 55), on the primary counterfactual, it is likely that he would have acquired Lot 3(No 53) or Lot 4(No 51), as the additional lots. In those circumstances, the way to assess his loss is to take the arithmetical average of the current market value of Lot 3(No 53) and Lot 4(Lot 51) as the starting point. These two lots are selected by Mr Henry SC for this calculation because: Mr Huang would have acquired one or other of them; but, he is not to be compensated on the basis that he would have acquired both of them, because Ms Wu would have taken two lots and only left one for the Huangs.

79. So to make this submission good, Mr Henry SC takes the average of the capital gain on Lot 3(No 53) of $418,287.27 and the capital gain on Lot 4(No 51) of $305,787.27, which is $362,037.27. Mr Henry SC submits that is the only rational way to deal with the primary counterfactual, is to take an average of these two, because the lot that was likely to be acquired was one of those two. On Mr Henry SC’s submission, that figure of $362,037.27 is the starting point, which should be further discounted on a graduating basis to take account of the vicissitudes of the Huangs’ failing to complete the purchase. Firstly, it is put that Mr Huang only had $324,000 in his bank account at March 2011 and the purchase price of one of the lots (they all being the same price) was $525,000 plus conveyancing costs, which amounted to a total of about $575,000.

80. But Mr Huang did not have the full purchase price of the first property. He was about $250,000 short. He did have other collateral. So Mr Henry SC submits that there should be some further discount applied for the possibility that he would not have gone ahead with the purchase to acquire one lot. Mr Henry SC accepts that on the first Lot this discount would be likely to be low, as there is a reasonable likelihood that with his then available funds, completion of this single contract would have occurred. He submits that a 10% discount would properly reflect the position that he would not have completed the contract and acquired a single lot in any event, even though it was available to him.

81. But the Court has found that there was a 30% chance that Mr Huang would have acquired two other properties. Mr Henry SC’s submissions deal with that possibility as well. He submits that if the Huangs were to have not one but three properties made available to them, that when one is looking beyond the acquisition of the first additional property to the other two, the risks of failing to complete the other two properties markedly increase.

82. He submits that here the Huangs were facing the possibility that they might have had to borrow $250,000 to acquire one lot, but the risk is rises if they had to borrow $575,000 for a second lot, and then another $575,000 for a third lot. So Mr Henry SC submits that, in respect of the second property, there should be a discount of 90% to reflect the fact that it is highly probable that Ms Wu would have taken that property and there was much more risk for Mr Huang in obtaining the finance and settling in addition to settling on the first property. So the value to be placed on the Huangs getting the second property is only 10 per cent.

83. He further submits, in relation to the third property, that (apart from Ms Wu taking the property) there is an even higher chance than for the second property that Mr Huang would not have obtained the finance and would not have been able to complete the purchase of that property. So he submits the overall chance of the Huangs not having available and then not completing this third property should be put at 95%. So the ultimate value that should be placed on the chance of the Huangs getting the third property is only 5%.

84. Mr Henry SC’s submission is not persuasive. The idea that the Huangs would never have acquired Lot 1 (No. 57) and would only have acquired either Lot 3 (No. 53) Lot 4 (No. 51), cannot be sustained. The Court has found that there was a 30 per cent chance that Mrs Wu would drop out absent Mr Petkovski’s unconscionable conduct. In valuing the possibility that this 30 per cent chance might be realised, the Court consistently should assume that the properties that Ms Wu abandoned were potentially available for the Huangs to acquire. They did acquire Lot 2 (No. 55). When the 30 per cent chance of Ms Wu dropping out is being valued, consistently it is necessary to reason on the basis that Lot 1 (No. 57) was potentially available to the Huangs. That is the approach the Court will take.

85. And Lot 2 (No. 55) can be put to one side because the Huangs did acquire it in the end. Of the unacquired Lots, Lot 1 (No. 57), Lot 3 (No. 53) and Lot 4 (No. 51) the question then arises whether it can be inferred Mr Huang would have purchased one or other of those lots first.

86. The evidence suggests that there was a reshuffle of available lots in May 2012, shortly before the execution of the three rescision deeds which were executed on 29 March 2012. The course of events at this time is fully set out in the first judgment ([291] - [306]). Mr Huang wanted all of these lots. He sought to obtain from Mr Petvoski whatever he could get.

87. The Court has already found that Mr Huang could have purchased Lot 1 (No. 57) with the cash he had in the bank as at 29 June 2011. But the Court has not found this is the lot the Huangs would actually have first purchased. The evidence did not express a preference for the order in which the Huangs would acquire these lots.

88. Thus the only reasonable way the matter can be approached is to reach an average capital gain for all three lots and for the Court to reason from there. On this basis the average capital gain per lot is $403,200.33 (being $485,526.46 plus $418,287.27 plus $305,787.27 divided by 3). On the primary counterfactual, the probability of the first additional lot being acquired is considerably higher than the next two, the second and third lots having a maximum possibility of acquisition of 30 per cent.

89. To cover the full acquisition costs of the first property the Huangs would probably have had to borrow another $250,000. Mr Henry SC submits there was some risk associated with the acquisition of this first lot. In my view, it was very slight. The Court’s findings so far are that this “would not have been a difficult acquisition for him”. But now in the damages hearing the Court is being asked to assess the risk of non-completion. In my view, there was some risk but it should only be assessed at 5 per cent. The capital gain on this first property can therefore be reduced by 5 per cent from $403,200.33 to $383,040.31.

90. That leaves the second and third lots. The average capital gain forgone by the Huangs on these lots is again, $403,200.33 each. The maximum possibility that the Huangs would have had of acquiring either of those properties is 30 per cent, that being reflecting the possibility that Ms Wu would have dropped out. But as Mr Henry SC correctly points out there are further contingencies associated with the acquisition of the second and third lots. Mr Henry SC submits that the chances of the Huangs not being able to proceed with the remaining two lots should be put at 90 per cent and 95 per cent respectively.

91. But these discounts are far too high. They do not take proper account of the determination of Mr Huang to purchase the remaining properties if he could. His pursuit of this litigation is some evidence of that determination. The Court has already found in the first judgment that the Huangs had the financial capacity to buy all three remaining properties (first judgment at [407]). And he did have other collateral available to him to borrow to acquire them. In my view, there is little to distinguish between the acquisition of the second and third properties. But Mr Henry SC’s submission has force that it is more likely that the Huangs would have failed to purchase the last property than the second last property. So a higher discount should be applied for the prospect of failing to complete the last purchase. But these additional discounts should not be large.

92. In my view, the appropriate way is to reduce the 30 per cent discount already being applied to 25 per cent for the second additional property purchased. The value of the lost opportunity of acquiring and completing on the second property is $100,800.08, being $403,200.33 multiplied by 25 per cent.

93. There was a slightly higher possibility of not completing on the third additional property. The Court will therefore reduce the overall value of that to 20 per cent, which produces a figure of $80,640.07 being $403,200.33 multiplied by 20 per cent.

94. The total loss of opportunity of the three properties therefore is the total of these three figures, which is $564,480.46 (being the total of $383,040.31, $100,800.08 and $80,640.07). Judgment will be entered for this sum on account of the loss of opportunity claim.

Damages for the Boundary Modification

95. Another aspect of this third group of claims are the damages to be assessed in respect of the Court’s findings of Mr Petkovski’s contravention of Australian Consumer Law, s 18 for failing to notify Mr Huang of the realignment of the property boundaries, principally those between Lot 1 (No.57) and Lot 2 (No.55), that were occasioned by the Modified Development. The Court analysed this issue extensively in the first judgment, (at [383] to [397]). It is Claim 6 of the parties’ list of claims on the relief hearing.

95. In the first judgment (at [397]) the Court held that if Mr Petkovski had notified Mr Huang of the boundary changes, then Mr Huang would have proceeded with the purchase of the three lots that he and Ms Huang purchased but that he would have sought and received compensation for the boundary changes between these various lots.

96. The parties have undertaken a calculation of the damages occasioned by that finding of breach of Australian Consumer Law, s 18 and have now agreed upon a sum of damages. The calculation is accepted on both sides and is constructed the following way.

97. The total area of the six lots is 3,415.2 m². The Huangs purchased one half of the total, which is 1,707.6 m². But as result of the misleading conduct, for which the Huangs received no compensation, they ended up with only 1,654.4 m² and without any compensation for the shortfall of 53.2 m² (being 1,707.6 m² -1,654.4 m²).

98. The parties agree that the total value of the six lots at the time of the misrepresentation was $3,150,000. That means the value of 1 m² ($3,150,000 divided by 3415.2 m²) is $922.34. As Mr and Mrs Huang had lost 53.2 m², their total loss was $49,068.48 (being 53.2 m² multiplied by $922.34 per square metre).

99. As result of agreement on this issue these reasons will record a judgment for $49,068.48 in the defendants/cross claimants’ favour on account of this claim.

100. Interest up to judgment will be available on this sum. It should be calculated from the date that compensation for the misdescription would otherwise have been received by the Huangs. That would have been on settlement of the three lots the Huangs purchased, on 29 June 2012.

What Indemnity can the Huangs Claim under the Trust Deeds?

102. The final group of claims relates to the Huangs’ action for an indemnity under the Trust Deeds (Claim 7). This Claim arises out of the cross-claimants’ case pleaded in prayer for relief 2A(a) and (b), which were claims for $833.55 and $876.36 respectively which were the subject of pleadings in the Second Further Amended Cross-Claim in paragraphs 60 and 64.

103. The claim for $833.55 is alleged to be an underpayment on 22 March 2011. On that date Mr Petkovski is alleged to have given Mr Huang a cheque for $25,416.65 drawn by Goran Petkovski instead of $26,250, being an underpayment of $833.55.

104. The Court made findings about this underpayment in the first judgment in connection with the possibility of the Trust Deed associated with the purchase of Lot 1 (No. 57) being void (at [274] and [275]). Those findings were as follows:

“274.   On 2 March 2011, Mr Huang says Mr Petkovski gave him a cheque for $25,416.65 from Mr Goran Petkovski, one of the co-purchasers of Lot 1 (No. 57). Mr Huang deposited the cheque into his cheque account.

275.   Mr Petkovski’s file (Exhibit 15) shows that he miscalculated the correct amount for the deposit due in respect of the purchase of Lot 4 (No. 51). The correct amount under the Option Agreement was $26,250. That is the amount due under the Trust Deed that Mr Goran Petrovski was to immediately reimburse Mr and Mrs Huangs. But in fact Mr Petkovski’s file shows that the amount that Mr Goran Petrovski paid to Mr Huang was $25,416.65. This had the consequence under clause 9 of the Deed that the Deed became void.”

105. Thus the Court has already founded an underpayment of $833.35. The only question is whether it is recoverable under the relevant Trust Deed. Mr Petkovski parties do not dispute that Mr Goran Petkovski is a beneficiary of one of the three Trust Deeds executed on 10 March 2011. As the Court's first judgment found there were three such Trust Deeds executed in the following structure:

“228.   Under the executed Trust Deeds, Mr and Mrs Huang are defined as the trustees of the respective trust properties. Mr Goran Petkovski is the beneficiary of Lot 4 (No. 51) under the first Trust Deed signed. The beneficiaries of the second Trust Deed signed are Mr Con Elfes and Mrs Yanna Elfes in relation to Lot 3 (No. 53). The third Trust Deed signed has Mr Petkovski, Ms Diana Petkovski, Mr George Gashovski and Mr Lence Petkovski as beneficiaries of Lot 1 (No. 57).”

106. But the cross-defendants other than Luben Petkovski are of course Diana Petkovski, George Gashovski and Lence Petkovski. Neither Mr Goran Petkovski or Ms Elfes is a cross-defendant, or a plaintiff. The plaintiffs/cross-defendants do not dispute that there was an underpayment of the amount in question, but they submit that none of them assumed the obligation to pay the obligation of Goran Petkovski to the Huangs. They are not parties to the Trust Deed executed by Mr Goran Petkovski. They submit they are not liable to make good to the Huangs any failure by Mr Goran Petkovski to fulfil his obligations under the Trust Deed in respect of which he was the sole beneficiary.

107. This submission is persuasive. Clause 5 of the Trust Deed provides that "the Beneficiary will provide to the Trustee one-sixth (1/6) of the consideration for the acquisition of the property and to share the expenses and costs associated with the proposed subdivision”. The Trust Deeds do not contain a provision which enables the trustee to look to the beneficiary of one Trust Deed to remedy the default of a beneficiary under another Trust Deed. This is the very gap which the Court pointed to in the Trust Deeds in its first judgment. Mr Goran Petkovski could have been sued as a cross-defendant under the Trust Deed relating to Lot 4 (No. 51). But he has not been joined as a cross-defendant. As the other cross-defendants do not expressly assume his obligations, and no other equitable basis on which they might be said to assume his obligations was propounded, this claim must fail.

108. The second claim that the Huangs make for indemnity is in the sum of $876.36. But just how this sum is made up is unclear. The cross-defendants take this point of lack of clarity and they are correct. The composition of this figure has not been identified at any stage in the Huangs’ submissions. This claim must fail on that ground alone.

109. But the Huangs make a broader claim, which their 6 September 2019 written submissions made clear is unpleaded:

“105.   Unfortunately, this understatement was carried forward in the cross-claimants’ preliminary submissions. However, before the Further Amended Statement of Cross- Claim was filed, the cross-defendants were in possession of the evidence that itemised the specific amounts asserted to be unpaid under the indemnity provisions as set out in the following parts of the evidence of the first cross-claimant:

An amount of $52,366.00 in respect of the sub-divisional works.

An amount of $3,335.00 in respect of legal fees.

An amount of $181.53 in respect of insurance.

106.   No objection was taken in respect of the above evidence of the first-cross claimant.

107.   It was clear, prior to the filing of the Further Amended Statement of Cross Claim, of the amounts that the Cross-Claimants were claiming in respect of monies underpaid under the Trust Deed.

108.   Once the assessment of damages was deferred to a later date, the precise formulation of the amount did not occur.”

110. When one looks at the affidavit of Mr Huang of 27 July 2016 there is some evidence to support expenditure of some parts of these claimed amounts. But on the material presented, the Court should not proceed to make any findings on this claim against the cross-defendants for a number of reasons.

111. First, the claim is unpleaded. The Huangs’ own submissions admit that errors were made in not particularising the claim better than it was, during their amendment of pleadings. Merely because the evidentiary material is in the affidavit evidence does not mean that there is no prejudice suffered by the cross-defendants by the lack of a formal pleading amendment. The cross-defendants could legitimately say that they did not know how the evidence was going to be used against them and therefore did not cross-examine upon it.

112. Secondly, the evidence is deficient anyway. As the cross-defendants point out the claim for $52,366 in respect of the subdivisional works does not analyse the calculation of one-sixth (1/6) of the total subdivisional works in a logical way. The cross-claimants would need to prove what was the total cost of subdivision work and calculate one-sixth of that total cost and then demonstrate to what extent that the cross-defendants have failed to pay the one-sixth of the total cost of subdivision. The absence of such evidence is fatal for such a claim. The other claims in my view are no better.

113. Thirdly, there is a more fundamental problem with this claim. It is inconsistent with the hypothesis on which the Court has allowed damages for entry into the Trust Deeds. That claim is predicated on the basis that the Trust Deeds were not entered into. But this indemnity claim sues upon the Trust Deeds. In my view, the Huangs cannot have both.

114. The matter can be tested this way. The Court has awarded the capital gain on the forgone lots to the Huangs, under Claims 4 and 5. But the awarding of the capital gain brings with it an assumption that the Huangs bear the outgoings of acquiring the property. Their claim now for an indemnity for those outgoings is inconsistent with that analysis. This claim will be dismissed.

Conclusions and Orders

115. The relief hearing has produced a mixed result in relation to the various claims of the parties. This may well lead to argument about costs. The Court will therefore reserve the costs of the relief hearing but will direct the parties to confer, with a view to seeing if appropriate costs orders can be reached between them by agreement. If agreement is not reached then the parties will be directed to bring in short minutes of order to bring the cost issues to a contested hearing.

116. The parties will need to undertake calculations of interest. The Court has recorded the latest date from which interest will run in respect of the claims in this judgment, where applicable. In respect of the claims in the previous judgment, the sums of money are relatively small and the parties should agree upon conventional dates from which interest should be calculated.

117. For these reasons the Court orders as follows:

1. Judgment for the cross claimants for damages for $49,068.48 against the first cross-defendant on account of the cross claimant’s claim for damages for misleading conduct in relation to the Modified Development, as recorded in the Court’s principal judgment between [383] and [392);

2. Judgment for $564,480.46 for the cross-claimants for equitable compensation and damages under Australian Consumer Law, s 236 on account of the cross-claimants’ claim for the loss of opportunity to purchase the remaining lots in the subdivision.

3. On the cross claimants’ claim for indemnity under the Trust Deeds, order that there be judgment for the cross-defendants.

4. The parties are directed to confer in relation to the calculation of appropriate interest on the judgments recorded in these orders and the Court’s orders made on 8 November 2011 by 22 November 2019.

5. Reserve all questions of costs of the relief hearing and

1. Direct the parties to confer by 22 November 2019 with a view to reaching agreement about the costs of the relief hearing; and

2. if agreement is not reached between the parties, as directed by (a), then the parties are directed to bring in short minutes of order by 29 November 2019 providing for a timetable which will permit the court to resolve all remaining costs issues are 16 December 2019.

6. Grant liberty to apply to my Associate to fix a further hearing date for any unresolved issues.

7. Upon the cross claimants by their counsel giving the undertaking as to damages, Order 5 made on 3 October 2019 as amended on 8 November 2019 is extended until 5pm 15 November 2019.

8. Direct the parties to provide agreed orders, or if not agreed, their competing orders in continuation of the injunction by 9am tomorrow, 15 November 2019.

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Decision last updated: 15 November 2019