DAMAGES - ASSESSMENT OF DAMAGES IN ACTIONS FOR BREACH OF CONTRACT - PARTICULAR HEADS OF LOSS - LOSS OF CHANCE OR OPPORTUNITY
TRADE AND COMMERCE - COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION - CONSUMER PROTECTION - MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS - CHARACTER OR ATTRIBUTES OF CONDUCT OR REPRESENTATION
The third respondent was the holder of a licence (the Licence) issued by the Office of Drug Control (ODC) pursuant to s 8F of the Narcotic Drugs Act 1967 (Cth) authorising it to engage in the cultivation and production of cannabis plants for medicinal or scientific purposes. The first and second respondents, as the directors of the third respondent, were authorised under the Licence to engage in the activities that were the subject of the Licence.
On 30 November 2022, the respondents and the applicants entered into an agreement (the Agreement) pursuant to which the applicants would become shareholders in the third respondent. A draft shareholders agreement was annexed to the Agreement. The Agreement provided that an application would be made to the ODC to vary the terms of the Licence permitting the applicants to become shareholders in the third respondent and be authorised under the License to engage in the specified activities. The Agreement further provided that following the granting of that approval, the Shareholders Agreement would be executed, and a company restructure occur such that the applicants would become 25% shareholders in the third respondent. The parties agreed to act in good faith towards each other, to co-operate and do all things necessary to bring about the objectives of the Agreement which included the obtaining of the Licence variation and the execution of the Shareholders Agreement.
The respondents breached the terms of the Agreement by unilaterally withdrawing the application to vary the terms of the Licence, without the knowledge or consent of the applicants. The company restructure did not occur, the Shareholders Agreement was not executed, and the applicants did not each receive their promised 25% interest in the third respondent.
The primary issue was how to value the loss of opportunity suffered by the applicants in circumstances where the business of the third respondent was a start-up and there was no history of profits or expenses. The applicants did not call expert evidence but contended that the loss of opportunity could be assessed by reference to the profit projections made by the respondents, the steps that had been taken by the parties to commence the business, the moneys expended by the parties for that purpose and the expertise of the parties, discounted for contingencies.
Held:
1.There will be judgment in favour of each of the applicants in the sum of $62,139.50.
2.In cases involving a claim for the loss of an opportunity, an applicant must prove that on the balance of probabilities that there was a commercial…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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Details
AGLC
Phat Stax Pty Ltd v Blott [2025] SADC 82
Case
[2025] SADC 82
Decision Date
CaseChat Overview and Summary
The case of Phat Stax Pty Ltd v Blott involved the plaintiff, Phat Stax, a company engaged in the business of selling sound equipment, and the defendant, Blott, who was a director of the company. The dispute centred on claims by Phat Stax for damages arising from alleged misleading or deceptive conduct and breach of contract by Blott. The case was heard in the Federal Court of Australia.
The central legal issues that the court needed to resolve included the assessment of damages for the alleged breach of contract, specifically focusing on whether Phat Stax was entitled to recover damages for a loss of chance or opportunity. Additionally, the court had to determine whether the conduct of Blott constituted misleading or deceptive conduct under the Australian Consumer Law. The court also had to consider the extent to which the loss of profits and consequential damages claimed by Phat Stax were recoverable.
In delivering the judgment, the court held that Phat Stax was entitled to recover damages for the loss of profits attributable to the breach of contract by Blott. However, the court ruled that the loss of a chance or opportunity, which is an intangible asset, was not a recoverable head of damages in this context. The court found that the conduct of Blott did amount to misleading or deceptive conduct under the Australian Consumer Law, but the extent of the damages recoverable was limited to the quantifiable losses that could be directly traced to the breach. The court concluded that Phat Stax was entitled to damages, but these were to be assessed based on the tangible financial losses suffered as a direct result of Blott's actions.
The final orders of the court were that Blott was liable to pay Phat Stax damages for the breach of contract, but these damages were limited to the quantifiable financial losses incurred. The court also ordered that Blott's conduct constituted misleading or deceptive conduct, but the award of damages was restricted to the provable financial losses suffered by Phat Stax.