Netline Pty Ltd v QAV Pty Ltd
[2025] WASC 232
•16 JUNE 2025
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: NETLINE PTY LTD -v- QAV PTY LTD [2025] WASC 232
CORAM: WHITBY J
HEARD: 28 & 29 MAY 2025
DELIVERED : 16 JUNE 2025
FILE NO/S: CIV 1289 of 2014
BETWEEN: NETLINE PTY LTD
KATHRYN ISABEL LANCE
Plaintiffs
AND
QAV PTY LTD
Defendant
Catchwords:
Assessment of damages - Expert evidence - Turns on own facts
Legislation:
Nil
Result:
Plaintiffs' damages assessed in the amount of $25,515.35
Category: C
Representation:
Counsel:
| Plaintiffs | : | L A Warnick SC |
| Defendant | : | N M Cooke |
Solicitors:
| Plaintiffs | : | Graham & Associates Lawyers |
| Defendant | : | Lawton Gillon |
Case(s) referred to in decision(s):
Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54
Knell v Harris [2018] WADC 177
Knell v QAV Pty Ltd [2020] WASCA 23
Netline Pty Ltd v QAV Pty Ltd (No 2) [2015] WASC 113
Netline Pty Ltd v QAV Pty Ltd [2020] WASC 23
Netline Pty Ltd v QAV Pty Ltd [2022] WASCA 131
Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8
WHITBY J:
The plaintiffs own a short stay unit in Perth Ascot Central Unit complex (Unit 107). The defendant provides caretaking and letting services for the Ascot Central Unit complex, including for Unit 107. There has been a long and litigious history between the parties dating back to at least 2013 in relation to the defendant's caretaking and letting of Unit 107. These reasons are about an assessment of the plaintiffs' damages.
There have been several previous judicial decisions arising out of the defendant's repudiation of a split return agreement (SRA)[1] entered into between the plaintiffs and the defendant, and more generally the relationship between the parties. These decisions are:
(1)the decision of Beech J (as his Honour then was) in Netline Pty Ltd v QAV Pty Ltd (No 2) [2015] WASC 113 (Liability decision);
(2)the decision of Beech J in Netline Pty Ltd v QAV Pty Ltd (No 2) [2015] WASC 113 (S) (Costs decision);
(3)the decision of Beech J in Netline Pty Ltd v QAV Pty Ltd (No 2) [2015] WASC 113 (S2) (Supplementary Liability decision);
(3)the decision of Goetze DCJ in Knell v Harris [2018] WADC 177 (Defamation decision);
(4)the decision of the Court of Appeal in Knell v QAV Pty Ltd [2020] WASCA 23 affirming the Defamation decision (Defamation Appeal decision);
(5)the decision of Master Sanderson in Netline Pty Ltd v QAV Pty Ltd [2020] WASC 23 in relation to the assessment of the plaintiffs' damages (Master's Assessment decision); and
(6)the decision of the Court of Appeal in Netline Pty Ltd v QAV Pty Ltd[2022] WASCA 131 setting aside the Master's decision (Appeal against Master's Assessment decision).
[1] Exhibit 5.
In the Liability decision, Beech J found that the defendant had wrongfully refused to continue to perform its obligations under the SRA and ordered damages to be assessed. The assessment of damages was conducted before me over two days - 28 and 29 May 2025.
For the reasons that follow, I assess the plaintiffs' damages in the amount of $25,515.35.
Background facts
On 29 February 2008, the parties entered into the SRA pursuant to which the plaintiffs appointed the defendant, until termination as provided for under cl 9 of the SRA, to let Unit 107 to third parties and provide ancillary letting services to the plaintiffs. In return, the defendant's fee for those letting services was 55% of the gross rent collected by the defendant.
In December 2013, the defendant, by its director Mr Knell, purported to terminate the SRA with effect from 18 March 2014. On 27 February 2014, the plaintiffs commenced these proceedings. The plaintiffs sought a declaration that the defendant's notice of termination was ineffective to terminate the SRA and specific performance of the SRA.
On 2 April 2015, Beech J delivered judgment and published reasons for decision.[2] Beech J held that the defendant was not entitled to terminate the SRA but that an order for specific performance of the SRA should not be made.
[2] Liability decision.
At the time of the Liability decision, it appeared that the relationship between the plaintiffs and the defendant was damaged beyond repair and unworkable.[3] In that context, Beech J said, in relation to the assessment of damages:[4]
On the face of it, there would not seem to be any insuperable difficulties of proof or assessment of damages. Historical figures would be available for the [plaintiffs'] net income, and the income for the owners of other lots in Ascot Village. With appropriate adjustments, the difference between the [plaintiffs'] net income using a new agent and that of an appropriate comparator (whose property is let by the [defendant]) would, with any appropriate adjustments, seem to reflect the [plaintiff's] historical loss up to the point when the assessment takes place. The loss for the remainder of the term could then be derived from that historical loss. (my emphasis added)
[3] Liability decision [103].
[4] Liability decision [65].
As it transpired however, the defendant continued to provide letting services to the plaintiffs in relation to Unit 107. The defendant provided those services to the plaintiffs on a 'fixed return basis' as opposed to a 55% / 45% split return in accordance with the SRA.
The result is that the parties are in dispute as to the appropriate methodology for the assessment of the plaintiffs' damages, essentially that dispute turns on the appropriate comparator to be used in order to assess damages.
I will outline the legal principles applicable to the assessment of damages before turning to outline the differences between the parties in approaching this task.
Assessment of damages - legal principles
The object of damages for breach of contract is to put the innocent party in the position that they would have been, so far as money can do, if the contract had been performed.[5] This involves a comparison between the position the innocent party would have been in had the breach not occurred and the position the innocent party is in after the breach of contract.[6]
[5] Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272 [13].
[6] Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64, 80 (Amann Aviation).
The innocent party bears the onus of proving that it has suffered loss and damage caused by the defendant's breach of contract.[7] The defendant bears the onus of proving that the innocent party has failed to take reasonable steps to mitigate its damage and the extent to which it has failed to mitigate its damage.[8]
[7] Appeal against Master's Assessment decision [37].
[8] Appeal against Master's Assessment decision [40].
In the Appeal against Master's Assessment decision, the Court of Appeal said the following in relation to the measure of the plaintiffs' damages in this case:[9]
… the measure of the [plaintiffs'] damages for the [defendant's] breach of the SRA was the amount of money that was necessary to place the [plaintiffs] in the same position, so far as money could do it, as if the SRA had been performed, less the amount of the loss which the [plaintiffs] had avoided (for example, by letting [Unit 107] to third party customers). A further deduction would be necessary if the [defendant] proved that the [plaintiffs] had failed to mitigate their loss.
[9] Appeal against Master's Assessment decision [44].
The plaintiffs' damages are limited to the net benefit they would have received under the SRA. Conversely, the defendant is not entitled to profit from his breach of the SRA - if the plaintiffs would have suffered a net loss if the SRA had been performed, then the defendant is not entitled to recover any additional amount it did pay the plaintiffs. This means that the measure of damages is governed by the net profit the plaintiffs would have received under the SRA.[10]
[10] Amann Aviation [3].
Evidence
The plaintiffs adduced evidence from Mr Warren Lance, a director of the first plaintiff.
The plaintiffs also adduced expert evidence from:
(1)Oscar Westerlund, the managing director of a hotel consulting company, with 40 years' experience as a professional property valuer and analyst of hotel development viability. Mr Westerlund's current role requires him to analyse and assess potential hotel income over a timeline and consider the potential investment worth of those income streams as part of project feasibility. Mr Westerlund prepared an export report filed 31 July 2024;[11] and
(2)Jessica Ayerst, a certified practicing valuer. Ms Ayerst prepared an expert report dated 4 September 2024.[12]
[11] Exhibit 2.
[12] Exhibit 1.
The defendant adduced evidence from Mr Sidney Knell, a director of the defendant.
The defendant also adduced expert evidence from Smiljan Jankovic, a chartered accountant with expertise in the accommodation and hospitality industries. Mr Jankovic prepared several reports, emails and affidavits - a report dated 20 January 2025;[13] email dated 28 March 2025;[14] affidavit sworn on 16 May 2025[15] and further affidavit sworn on 26 May 2025.[16]
[13] Exhibit 6.
[14] Exhibit 7.
[15] Exhibit 8.
[16] Exhibit 10.
Mr Westerlund and Mr Jankovic also prepared several joint expert reports and spreadsheets - joint expert report dated July 2019;[17] joint memorandum dated 26 May 2025;[18] original spreadsheet entitled 'Actual and Projection Revenue';[19] revised spreadsheet entitled 'Actual and Projection Revenue - 45% with SRA Furniture Cal'[20] (Revised Spreadsheet).
[17] Exhibit 4.
[18] Exhibit 9.
[19] Exhibit 11.
[20] Exhibit 3.
Mr Westerlund and Mr Jankovic gave oral evidence at the hearing by way of concurrent expert evidence. Both were impressive witnesses and demonstrated significant expertise, both in their reports and their oral evidence, on the matters upon which they gave evidence. I also found the approach that both Mr Westerlund and Mr Jankovic took to the provision of their concurrent evidence to be of great assistance to the court. They were impartial and did not give evidence as advocates for the party who had engaged them - each was willing to change his opinion or make concessions when it was appropriate to do so. As a result, they were able to agree on all but one issue - that being what is the most appropriate revenue comparator to Unit 107. In Mr Westerlund's opinion, it is the average gross revenue of units 106 and 108, while in Mr Jankovic's it is the average gross revenue of all 36 units.
Mr Westerlund and Mr Jankovic prepared the Revised Spreadsheet which set out the amounts they agreed had been paid to the plaintiffs and the amounts that would have been paid to the plaintiffs under each alternate comparator. They agreed that:[21]
(1)if the actual revenue of Unit 107 is the most appropriate comparator, then the plaintiffs have actually received $27,725.10 more than what they would have received under the SRA;[22]
(2)if the average revenue of unit 106 and unit 108 is the appropriate comparator, then the plaintiffs' past loss is $25,515.35; or
(3)if the average revenue of all 36 units is the appropriate comparator, then the plaintiffs' past loss is $2,020.23.
[21] ts 667 - 668.
[22] Exhibit 3.
Assessment of damages
The parties agreed that the assessment of damages was divided into two categories - past loss and future loss. The parties approached the task of assessing past loss by reference to the period 2 April 2015 to 31 March 2025 (past loss period) and future loss by reference to the period 1 April 2025 to 31 January 2028 (future loss period). I adopt the same reference periods.
At the outset of the assessment of damages hearing, after a short adjournment, the parties agreed on the 'fixed return' to be paid by the defendant to the plaintiffs in return for the plaintiffs permitting the defendant to let Unit 107 (Fixed Return Agreement) for the future loss period.[23] The parties also agreed that the Fixed Return Agreement meant that future loss was eliminated and therefore, I was not required to assess damages, if any, for the plaintiffs' future loss. There remained an issue, however, as to whether any alleged 'windfall' (the term used by counsel for the defendant) received by the plaintiffs pursuant to the Fixed Return Agreement should be offset against the amount of any past loss suffered by the plaintiffs. For reasons I will later explain, I find that no amount paid pursuant to the Fixed Return Agreement should be offset against any of the plaintiffs' past loss.
[23] Exhibit 12.
Turning then to consider the past loss, if any, suffered by the plaintiffs.
Past loss
The plaintiffs' past loss is assessed by determining what the plaintiffs would have received under the SRA had it not been terminated, less what they did actually receive. The gross revenue paid to the plaintiffs by the defendant over the past loss period is not in issue - that being $301,040.28.[24] There is an issue as to whether a further amount of $7,500 was received by the plaintiffs from the defendant for a 'top-up' revenue payment for Unit 107 - I will consider this separately later in these reasons. However, the critical matter in issue between the parties is what the plaintiffs would have received under the SRA. The fundamental difference between the parties is what they say is the appropriate comparator to assess this amount.
[24] Exhibit 3.
In order to assess the amount the plaintiffs would have received under the SRA, I am required to decide which of the three alternatives is the appropriate comparator over the past loss period.
The defendant submitted that the plaintiffs have not suffered any past loss because the amount they have received from the defendant is more than the amount they would have received under the SRA, that being 45% of the actual gross revenue of Unit 107 over the past loss period.
Alternatively, the defendant submits that the best-case scenario for the plaintiffs is that their past loss is assessed by comparison to the average gross revenue of all 36 units let by the defendant.
The plaintiffs submit that neither of those two comparators is reliable. The plaintiffs say that the most reliable comparator to assess past loss is the gross average revenue of units 106 and 108 (the neighbouring units on either side of Unit 107).
In my view, the appropriate comparator to assess the amount the plaintiffs would have received for Unit 107 if the SRA had been performed, is the average revenue of units 106 and 108, in preference to the actual revenue of Unit 107 or the average revenue of all 36 units. That is for several reasons which I set out below.
Actual revenue of Unit 107
In my view, the actual revenue received by the plaintiffs from the defendant for the past loss period is not a reliable comparator. That is because the defendant did not, in my view, endeavour to maximise the rental income for Unit 107 during the past loss period as required by the terms of the SRA.
Clause 4.1 of the SRA provides:[25]
4.1The [defendant] must:
(a)offer [Unit 107] for rent as short stay accommodation on behalf of the [plaintiffs];
(b)let and manage [Unit 107] competently and diligently;
(c)endeavour to maximise the rental income for [Unit 107] in the circumstances of the prevailing rental market;
(d)where applicable and with the cooperation and assistance of the [plaintiffs], set and maintain standards and services in relation to the star rating for [Unit 107] established periodically by tourist accommodation and rating authorities such as the RAC.
[25] Exhibit 5, page 2.
Clause 4.1 of the SRA informs the assessment of the amount the plaintiffs would have received under the SRA, that is the plaintiffs would have received an amount which is calculated on the basis that the defendant was endeavouring to maximise the rental income for Unit 107.
The plaintiffs say that the evidence of Mr Westerlund establishes that the defendant did not use its best endeavours to maximise the rental income for Unit 107.
Mr Westerlund's expert report contains a graph which illustrates a significant dip in the gross revenue of Unit 107, compared to unit 106 and unit 108, between 2018 and 2021:[26]
[26] Exhibit 2, page 15.
This 'dip' in revenue for Unit 107 is further illustrated in the following tables in Mr Westerlund's report depicting revenue for the years ended 31 March in each of 2019 and 2020 for units G06, G07, G08, 106, 107, 108 and 206, 207 and 208:[27]
[27] Exhibit 2, page 13.
Conversely, the defendant says that it did endeavour to maximise the rental income for Unit 107. In support of this contention, Mr Knell, the sole director of the defendant, gave evidence that:
(1)he had nothing to do with the bookings for Unit 107 - the bookings came in electronically and then were allocated to the units, a process he was not involved with;[28]
(2)he did not give any direction to the defendant's staff not to allocate bookings to Unit 107 or to give any negative treatment to Unit 107;[29]
(3)there was no safe in Unit 107 which was a requirement of Best Western (under which 'brand' the Ascot Unit complex operated from 2010 to 2018)[30] - therefore, Unit 107 could not be allocated any Best Western bookings, which accounted for approximately 14% of bookings received for the units;[31]
(4)he sent the plaintiffs' solicitors a letter dated 16 June 2016 in which he wrote:[32]
In addition, we will need them to agree to comply with such improvements to the unit, as are necessary to comply with Best Western specifications for capital replacements and improvements and installation of minor items, such as safes.
If this is not done, then your clients cannot complain that we are unable to allocate Best Western travellers to your clients' unit. We understand that the total cost of two safes (one is required for each of the two lettable areas in the unit) is less than $500;
and
(5)the plaintiffs renovated Unit 107 themselves, as opposed to the other units in the complex which were renovated by the defendant.[33]
[28] ts 733.
[29] ts 734.
[30] ts 731.
[31] ts 735.
[32] Exhibit 15, page 8.
[33] ts 736.
Counsel for the defendant submitted that there was no direct evidence of discrimination by the defendant towards the letting of Unit 107, rather there was direct evidence from Mr Knell that the defendant did not discriminate against the letting of Unit 107. The inference the defendant seeks to draw from Mr Knell's evidence is that any downturn in revenue from bookings for Unit 107 is attributable to factors outside of the defendant's control, those being that Unit 107 did not have a safe and/or was not renovated to the same standard as units 106 and 108.
The plaintiffs submit that the decline in revenue for Unit 107 from 2018 to 2021 cannot be attributed to the fact that Unit 107 did not have safe and/or that it was not renovated or not renovated to the same standard as units 106 and 108.
In relation to this, Mr Lance gave evidence that:
(1)he did not receive the letter dated 16 June 2016 sent by Mr Knell on behalf of the defendant to the plaintiffs' solicitors, the plaintiffs' solicitors only communicated the offer contained in that letter to him and he was not aware of the paragraphs in that letter that referred to the Best Western requirement to have a safe;[34] and
(2)the plaintiffs carried out renovations on Unit 107 in 2013 at the same time the other six units sharing the same stairwell were renovated and the renovations took four to five days.[35]
[34] ts 743.
[35] ts 738 - 739.
Mr Westerlund gave evidence that he inspected Unit 107 in 2019 and in his opinion, Unit 107 was of the same quality as units 106 and 108.[36] Mr Jankovic also inspected units 106, 107 and 108 in 2019 and he agreed with Mr Westerlund that they were in comparable condition.[37]
[36] ts 675.
[37] ts 677.
Mr Westerlund also gave evidence that there were no blockout periods preventing the letting of units 106, 107 and 108 during the past loss period.[38]
[38] ts 676.
In Ms Ayerst's opinion the key differences between units she noted on her inspection included:[39]
·Unit 107 provides different carpets to Unit 106 and 108. This not considered to have a negative or positive impact on the property in this regard.
·Unit 107 provides a larger living area in comparison to Unit 106 and the same living area to Unit 108. Onsite measurements indicated that the area of the studio of Unit 106 was smaller in comparison, with the 1 bedroom unit being of a similar size.
·Unit 107 provides larger balcony area in comparison to Unit 106 and the same balcony area to Unit 108.
[39] Exhibit 1, page 20.
The plaintiffs submit that the period over which Unit 107 experienced a significant decline in revenue, compared to units 106 and 108, corresponds to the occurrence of the following events:[40]
[40] Plaintiffs' chronology filed 23 May 2025
(1)October 2013 - Mr Knell commenced defamation proceedings against Mr Lance in the District Court;
(2)April 2015 - Beech J delivered the Liability decision finding in favour of the plaintiffs;
(3)July 2018 - trial of the defamation proceedings before Goertze DCJ in the District Court;
(4)December 2018 - Goertze DCJ delivered the Defamation decision dismissing Mr Knell's action with indemnity costs ordered against Mr Knell;
(5)February 2020 - Mr Knell's appeal against the Defamation decision was dismissed by the Court of Appeal in the Defamation Appeal decision;
(6)6 February 2020 - Master Sanderson delivered Master's Assessment decision in which the plaintiffs were awarded nominal damages of $10;
(7)6 May 2020 - Master Sanderson made formal orders giving effect to the Master's Assessment decision;[41]
(8)8 May 2020 - plaintiffs appealed Master's Assessment decision; and
(9)6 October 2022 - the Court of Appeal delivered judgment in the Appeal against Master's Assessment decision, allowing the plaintiffs' appeal and remitting the matter for rehearing before a judge of the Supreme Court.
[41] Exhibit 35.
In my view, there is a clear decline in the revenue of Unit 107, compared to units 106 and 108, over the period to 2018 and 2021. It is nothing more than pure speculation that the decline is linked to Unit 107 not having a safe. There was no evidence adduced by the defendant, other than the oral evidence of Mr Knell, to support the contention that Unit 107 was not let because it did not have a safe.
Further, there is direct evidence from Mr Westerlund, Mr Jankovic and Ms Ayerst that Unit 107 was comparable in quality to units 106 and 108. I am satisfied that the decline in revenue of Unit 107 is not attributable to the quality of renovations, or a failure to renovate, Unit 107.
In all of the circumstances, and based on the objective evidence of Mr Westerlund and the undisputed chronology of events, I am satisfied that it was more likely than not that the decline in revenue for Unit 107 from 2018 to 2021 was as a result of the acrimonious relationship between Mr Lance and Mr Knell. I am therefore satisfied that the defendant did not use its best endeavours to maximise the rental of Unit 107.
As a result, I am satisfied that the actual revenue of Unit 107 is not a reliable comparator to assess what would have happened under the SRA - there is a significant decline in the gross revenue of Unit 107 when compared not only to units 106 and 108, but to the units on the floors above and below units 106, 107 and 108.
Average revenue of all 36 units
In my view, the average revenue for all 36 units let by the defendant for the past loss period is also not a reliable comparator.
While this was the most appropriate comparator in Mr Jankovic's opinion, it was not according to Mr Westerlund.
Mr Westerlund's evidence was that:
(1)ground floor apartments tended to let at slightly higher rates, the first-floor apartments were let a step down and the second-floor apartments were lower still - this was due to the fact that there were no lifts at the complex;[42]
(2)units 106, 107 and 108 perform above the average of all 36 units in terms of the gross revenue that they are currently generating;[43]
(3)in 2022, unit 208 did not receive any revenue - this is one example of why an average of all 36 units, which includes unit 208, is not an appropriate comparator;[44] and
(4)unit 106, 107 and 108 were operational throughout the entire past loss period.[45]
[42] ts 621.
[43] ts 623.
[44] ts 623.
[45] ts 625.
Mr Jankovic's evidence was that:
(1)he agreed that the performance of unit 208, which was unoccupied for significant periods due to renovation and refurbishment, would have impacted the bottom line for the average revenue of all 36 units;[46]
(2)he agreed that Unit 107 was not blocked from being let during the past loss period for any renovation refurbishment;[47]
(3)in accordance with industry principles, the average of all 36 units was appropriate to make future projections;[48]
(4)when an average of all 36 units is used, it gives much more comprehensive data and takes into account that other units, not just Unit 107, were performing below units 106 and 108 over the past loss period;[49] and
(5)an average of all 36 units is the best benchmark to 'make sure that it's a fair share for the Unit 107 performance'.[50]
[46] ts 632.
[47] ts 648.
[48] ts 632.
[49] ts 645, 650.
[50] ts 647.
In assessing damage for the past loss period, my enquiry is not what is a 'fair share' of revenue for Unit 107, it is what would have been Unit 107's revenue had the SRA been in place. Mr Westerlund and Mr Jankovic agreed that, prior to 2018, Unit 107 earned higher revenue than the average of all 36 units and, after 2021, continued to earn higher revenue than the average of all 36 units. This fact was acknowledged by Mr Knell himself in his letter of purported termination of the SRA sent to the plaintiffs on 16 December 2013:[51]
… Our managers at Ascot have had a very difficult time, in managing your lot, given that you do not wish to accept the conditions that the majority of owners have accepted, particularly in relation to the fair and reasonable deduction of costs and expenses in the running of the letting business.
This is quite extraordinary, given that your lot has consistently achieved some of the highest returns of all the lots in the Serviced Apartment Schemes, since the inception of the schemes.
[51] Exhibit 25, page 1.
Mr Westerlund and Mr Jankovic did not give evidence as to the revenue that Unit 107 received for the period from 2008 to 2015, that is while the SRA was on foot, compared to units 106 and 108, or to the average of all 36 units. Whether such evidence would have assisted the plaintiffs or the defendant is not known. I do not have that evidence to assist me in determining the appropriate comparator. But on the basis of the evidence I do have, an average of the revenue of all 36 units (which is clearly skewed at least by unit 208), is not consistent with what the plaintiffs would have received under the SRA.
If the SRA had been in place, I am of the view that Unit 107 would have continued to generate revenue higher than the average revenue of all 36 units. Therefore, the average revenue of all 36 units over the past loss period is not an appropriate comparator to assess the plaintiffs' past loss.
Average revenue of units 106 and 108
Finally, I am of the view that the average revenue of units 106 and 108 is an appropriate comparator to assess the plaintiffs' past loss because:
(1)after 2021, the revenues of each of unit 106 and unit 108 track consistently with Unit 107;[52]
(2)all three units were available for let during the entire past loss period;
(3)each of the units is on the first floor and although there is a slight difference in size and carpets, the evidence of Ms Ayerst supports the finding that those differences would not have an impact upon letting the units to guests.
[52] Exhibit 2, page 15.
Therefore, as agreed by Mr Westerlund and Mr Jankovic, when the comparator against which the plaintiffs' past loss is assessed is the average revenue of units 106 and 108, the plaintiffs' loss for the past loss period is $25,515.35.
There remains an issue however, as to whether this amount for past loss factored in all the amounts that the plaintiffs had received from the defendants. I turn to consider that issue.
Amount that the plaintiffs have received from the defendant
Mr Westerlund and Mr Jankovic agreed that the plaintiffs received gross revenue of $301,040.28 for the past loss period, after taking into account amounts for the lease of furniture pursuant to the SRA and repairs and maintenance.[53]
[53] Exhibit 3.
Mr Knell gave evidence that the defendant had made two additional payments to the plaintiffs that had not been accounted for by the experts in calculating the amount that the plaintiffs had received.[54] Those amounts were:
(1)$19,489.16 alleged to have been paid on 7 July 2020 to the plaintiffs' lawyers at that time; and
(2)$7,500 alleged to have been paid on 17 July 2020 to the plaintiffs' lawyers at that time.
[54] Exhibit 24 [1].
Mr Westerlund and Mr Jankovic agreed that an amount of approximately $14,000 for an overcharging of furniture rental by the defendant had been factored into the amount actually received by the plaintiffs from the defendant, but that the other two amounts of $19,489.16 and $7,500 had not.[55]
[55] ts 678.
Counsel for the defendant conceded that the amount of $19,489.16 was an amount referable to the order of Master Sanderson made on 6 May 2020, being that the defendant pay the plaintiffs $14,987.76 plus interest for overcharging for furniture rental.[56]
[56] ts 764.
All that remained in issue, therefore, was whether the amount of $7,500 should be deducted from the plaintiffs' past loss.
Mr Knell gave evidence that the $7,500 was a 'top up' payment[57] pursuant to the deed poll that the defendant had executed on 14 June 2019 (Deed Poll).[58] In cross-examination, senior counsel for the plaintiffs referred Mr Knell to a reconciliation done by Tom Hodges, on behalf of the defendant, in August 2021 pursuant to the Deed Poll.[59] Mr Knell accepted that the payment of $7,500 is not recorded in Mr Hodges' reconciliation of payments due under the Deed Poll between June 2019 and July 2021.[60] Mr Knell gave evidence that he could not produce any document that establishes the $7,500 was paid pursuant to the Deed Poll.[61]
[57] ts 715.
[58] Exhibit 26.
[59] Exhibit 28.
[60] ts 703.
[61] ts 720.
Mr Lance gave evidence that the payment of $7,500 was an offer from Mr Knell, which he accepted, for legal costs associated with the Defamation Appeal decision.[62]
[62] ts 738.
There is no contemporaneous documentary evidence to support either Mr Knell's or Mr Lance's evidence in relation to the payment of the $7,500. I simply cannot be satisfied what the $7,500 was for. However, in my view, it is more likely than not that it was not a top up under the Deed Poll, given the reconciliation done by Tom Hodges in August 2021 does not refer to that payment and the fact that the payment of $7,500 was not discovered by Mr Knell until late May 2025, approximately 5 years after it is alleged to have been paid.
I find that the plaintiffs' past loss of $25,515.35 should not be reduced by $7,500.
Set-off of future 'windfall' against past loss
As I have outlined, the parties agreed that the plaintiffs' future loss did not need to be assessed as, pursuant to the Fixed Return Agreement, the parties agreed on a fixed amount payable by the defendant to the plaintiffs for the future loss period. That fixed amount is $141,215.41. However, based on the joint expert opinion of Mr Westerlund and Mr Jankovic, the net projected revenue payable to the plaintiffs for the future loss period, as if the SRA had been performed, is $132,895.68.
Counsel for the defendant submitted that the Fixed Return Agreement resulted in a $8,319.73 'windfall' to the plaintiffs and that this amount should be offset against any past loss assessed as owing to the plaintiffs.[63]
[63] ts 753. Counsel for the defendant orally submitted the amount of $9,142.36 was the 'windfall' but confirmed his calculations were incorrect in subsequent correspondence to the court dated 10 June 2025, and that the correct amount was $8,319.73.
Senior counsel for the plaintiffs did not accept the characterisation of this amount as a 'windfall', although did accept that the amount payable under the Fixed Return Agreement was more than the amount payable to the plaintiffs based on projected revenue for the future loss period.[64]
[64] ts 750.
The defendant's submissions in relation to the contended 'windfall' amount rely upon an assumption that the plaintiffs will in fact receive more under the Fixed Return Agreement than they would under the SRA. However, there is a flaw in that reasoning. The projected revenue for the future loss period is just that ‑ projected. It is not necessarily what the plaintiffs would have received under the SRA. That amount will never be known as it is based on a hypothetical scenario. The parties have reached an agreement recorded in terms of the Fixed Return Agreement - this is a commercial agreement between the parties intended to allocate risk and achieve certainty. The Fixed Return Agreement does not, when compared to the projected revenue under the SRA, crystallise a sum which can be offset against the plaintiffs' past loss.
I find that no amount referable to a projected surplus to the plaintiffs for the future loss period should be set off against past loss assessed as owing to the plaintiffs.
Conclusion and final orders
Judgment for damages assessed in the amount of $25,515.35 will be entered for the plaintiffs against the defendant. I will hear the parties as to final orders and costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CS
Associate to the Hon Justice Whitby
16 JUNE 2025
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