Phat Stax Pty Ltd v Blott - [2025] SADC 82

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
PHAT STAX PTY LTD & ANOR v BLOTT & ORS
[2025] SADC 82
Judgment of his Honour Judge Burnett
9 July 2025
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 opportunity available to it but that as a consequence of the conduct of the respondents, that commercial opportunity was lost. The applicant does not have to prove on the balance of probabilities that the lost opportunity would have come to fruition. The value of the opportunity is determined by assessing the likelihood of it occurring: Sellars v Adelaide Petroleum NL (1994) 179 CLR 332, BigTinCat Pty Ltd v Ramsay [2013] NSWSC 1248 applied.
3.It is not a bar to recovery that it is difficult to assess the value of the lost opportunity. Where it is not possible to assess the loss that the applicant might have suffered because the assessment involves speculation, the court must do the best that it can, using common sense and hindsight: BigTinCat Pty Ltd v Ramsay [2013] NSWSC 1248 applied. The value of the lost opportunity, being an opportunity that has some value and is not negligible, is to be assessed by reference to hypotheses and possibilities, which, though they were speculative and not capable of proof on the balance of probabilities, can be evaluated as a matter of informed estimation: Berry v CCL Secure Pty Ltd (2020) 271 CLR 151 applied.
4.Damages could be assessed having regard to the projections made by the third respondent, the steps taken to progress the business including the obtaining of a licence and development approval, the fact of the engagement of external consultants and negotiations with third parties, the expenditure of moneys by the applicants and the respondents, the experience of the parties and the actions of the respondents in breaching the Agreement so as to prevent applicants from obtaining a shareholding in the company: Ramsay v BigTinCat Pty Ltd (2014) 101 ACSR 415 applied. The loss of opportunity should be assessed having regard to the projected profits of the third respondent in its first year of operation, discounted for contingencies including that a proposed capital raising may not be successful.
5.Taking into account these matters, the assessment of the value of the lost opportunity should be based on 30% of the projected net profit (after tax) for the first year of operations in the sum of $828,527. Each of the applicants was to hold a 25% interest in the third respondent so it is therefore appropriate to estimate the value of each of the interests that they lost in the sum of $62,139.
6.Alternate claims for misleading conduct, breach of fiduciary duty and deceit failed because the applicants had not established that they had suffered any loss or damage (other than the loss of opportunity) by reason of the conduct of the respondents. The loss of opportunity was not claimable in respect of those causes of actions.

Competition and Consumer Act 2010 (Cth) sch 2, ss 4, 18, 236; Corporations Act 2001 (Cth) ss 131A, 766A, 763A, 764A, 761A, 1041I, and 1041E to 1041H; Narcotic Drugs Act 1967 (Cth) ss 8F, 8M, referred to.
Alexander v Cambridge Credit Corp Ltd [1987] 9 NSWLR 310; Barescape Pty Ltd v Bacchus Holdings Pty Ltd (No 9) [2012] NSWSC 984; Berry v CCL Secure Pty Ltd 2020) 271 CLR 151; BigTinCan Pty Ltd v Ramsay [2013] NSWSC 1248; Biggin & Co Ltd v Permanite Ltd [1951] 1 KB 422; Breen v Williams (1996) 186 CLR 71; Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; Chappel v Hart (1998) 195 CLR 232; Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; Futureronics International Pty Ltd v Gadzhis [1992] 2 VR 217; Gates v City Mutual Association Ltd (1986) 160 CLR 1; Gould v Vaggelas (1985) 157 CLR 215; John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; McCrohon v Harith [2010] NSWCA 67; Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388; O’Hallaron v R T Thomas & Family Pty Ltd (1998) 45 NSWLR 262; OzEcom v Hudson Investment Group [2007] NSWSC 719; Paciocco v Australia and New Zealand Banking (2015) 236 FCR 199; Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 77 ALJR 768; Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25; Radcliffe v Evans [1892] 2 QB 524; Ramsay v BigTinCat Pty Ltd (2014) 101 ACSR 415; Schindler Lifts Australia Pty Ltd v Debelak (1989) 89 ALR 275; Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; State of New South Wales v Moss (2000) 54 NSWLR 536; Sydney Attractions Group Pty Ltd v Frederick Schulman (No 2) [2013] NSWSC 1153; Warwick Entertainment Centre Pty Ltd v Alpine Holdings Pty Ltd (2005) 224 ALR 134, applied.

PHAT STAX PTY LTD & ANOR v BLOTT & ORS
[2025] SADC 82
Civil
Introduction

These proceedings concern an agreement by which the applicants were each to receive a 25% shareholding in the third respondent. The applicant and the respondents were to work together for the purpose, in broad terms, of establishing a business that involved the cultivation and sale of cannabis for medicinal purposes.
The applicants claim that the respondents breached the terms of the agreement, breached their fiduciary duties and engaged in misleading and deceptive conduct and deceit. The respondents denied those claims but did not plead a positive defence and at trial did not call any evidence or tender any documents. The respondents only engaged in limited cross-examination of the applicants’ witnesses.
The main issue in the case involved the assessment of damages. The claimed damages were the loss of an opportunity for the applicants to hold collectively a 50% interest in the shareholding of the third respondent and thereby participate in the profits derived by that company in carrying on the business of the cultivation and sale of cannabis for medicinal purposes. The business was a start-up and therefore had no history of profits or expenses. The applicants did not call any expert evidence but contended that the value of the loss of opportunity could be determined by taking into account the profit projections made by the respondents, the steps that had been taken by the parties in preparation for the business being carried on and the expertise of the parties. The applicants accepted that the profit figures derived from those matters would have to be discounted for contingencies.
The trial
The applicant called two witnesses, Mr Andres Donoso and Mr Paul Rigmany. Each of Mr Donoso and Mr Rigmany had sworn affidavits which were tendered as their evidence in chief. They were subject to only minimal cross-examination which did not call into question their credibility or reliability. The only substantive matter upon which Mr Donoso was cross-examined was the engagement of consultants who assisted in the preparation of an investor proposal and financial model, known as the Seeclan Proposal, which was to be sent to potential investors. For the reasons that appear later in this judgment, I have not accepted the claims of misleading conduct. I therefore do not need to make any findings about these matters and whether there was reliance on those experts for the purpose of causation in relation to the claims for misleading conduct.
I accept the evidence of Mr Donoso and Mr Rigmany. Mr Donoso was, at relevant times, one of the directors of the second applicant, Pek Contracting Pty Ltd (the second applicant or Pek). Mr Rigmany is the sole director of the first applicant, Phat Stax Pty Ltd as trustee of the Phat Stax Trust (the first applicant or Phat Stax).
In addition to their affidavits, two volumes of documents that were obtained from the Office of Drug Control (ODC) were tendered by the applicants.
Mr Timothy McCloud, as trustee for the Kings Trust Fund, was the fourth respondent in the proceedings. Prior to the commencement of the trial, the claim against Mr McCloud settled and he took no part in the trial.
Background facts
Given the way in which the trial proceeded, there was no dispute about the facts that gave rise to the dispute and these proceedings. Findings are therefore made as set out below. These findings are made from admissions made in the defence, the uncontroverted evidence of Mr Donoso and Mr Rigmany, and from documentary evidence.
Mr Rigmany and Mr Donoso were at all relevant times directors of the first and second applicants respectively and acted on behalf of those companies when dealing with the respondents. Mr Rigmany and Mr Donoso were known to each other and had previously invested in other businesses.
The third respondent, CBDOrganicAust Pty Ltd (the third respondent or CBD) was incorporated on 29 January 2018 and had, at that time, the first and second respondents, Mr Mark Blott and his wife, Mrs Amy Blott as its directors and shareholders. The share capital of CBD initially comprised 20 shares, with Mr Blott and Mrs Blott each holding 10 shares. On 27 September 2022, a further 140 shares were issued in CBD and allotted to Mr and Mrs Blott such that from that date they each held 80 shares in CBD.
On 28 September 2020, CBD obtained a medicinal cannabis licence No MC068 (the Licence) issued by the ODC pursuant to s 8F of the Narcotic Drugs Act 1967 (Cth). Pursuant to the Licence, CBD was authorised to engage in the cultivation and production of cannabis plants for the purpose of producing cannabis or cannabis resin for medicinal or scientific purposes. CBD was also authorised to engage in a number of ancillary activities such as the packing, transport, storage and possession of the cannabis and the supply of cannabis in accordance with the conditions of the Licence. Section 8M of the Narcotic Drugs Act provides that the licence must specify the persons who are authorised by the licence to engage in the activities authorised by the licence. The Licence authorised Mr and Mrs Blott, as the directors of CBD, to engage in the activities that were the subject of the Licence.
On 20 May 2021, Mr Blott sent a pitch deck to Mr Rigmany (the Pitch Deck) who in turn forwarded that Pitch Deck to Mr Donoso. The Pitch Deck sought an equity contribution in CBD. The Pitch Deck was prepared in the name of CBD and was entitled “Medicinal Cannabis Cultivation Investment Opportunity”. The Pitch Deck included the following statements and representations:
(1)CBD is a licensed medicinal cannabis cultivation company and in October 2020 received a medicinal cultivation and production licence. CBD will cultivate to supply local markets and develop opportunities to expand operations for global supply into 2022;
(2)CBD is seeking investment to cover the cost of the facility and the first year of operations. Investment will net approximately $1.6m post corporate tax in the first year of operations. The investment will be realised in the second year of operations;
(3)The facility cost is $2,547,618;
(4)The output per year is 1558kg;
(5)CBD is achieving milestones and has successfully achieved key timeline targets to date. The company will continue this successful approach to achievable and realistic targets into the future;
(6)CBD has achieved significant success through developing a hyper strategic approach to achieve the cultivation licence and developing key strategic partnerships before cultivation targets are achieved;
(7)CBD had achieved key relationships with local research organisations in South Australia and is currently in final talks with companies to secure key R & D arrangements;
(8)Australia’s medicinal cannabis market is projected to be worth $2.0 billion by 2024;
(9)CBD seeks to capture 1.0% of the Australian market at $200 million [sic] by 2025;
(10)CBD has partnered with a local technology innovation company to develop a product worth $10 million dollars per annum;
(11)CBD will supply its first shipment of cannabis in the first quarter of 2021;
(12)The projected forecast net income was $1,614,779 for the 2021-22 year, $4,335,881 for the 2022-2023 year, $25,439,351 for the 2023-2024 year and $23,775,476 for the 2024-2025 year. Forecast profit and loss statements were prepared to demonstrate how those figures were to be obtained;
(13)Mark Blott was a seasoned cannabis professional with previous experience in managing family vineyards and working in operations for large recycling companies;
(14)Mark Rowland was a medicinal cannabis consultant and had advised CBD on medicinal cannabis regulation and legalisation since 2017;
(15)The company is seeking to raise $2.5m for 40% equity to establish cultivation operations;
(16)Remaining equity is valued at $2.3m;
(17)CBD is seeking government funding of $3.8m to fund further expansion of the cultivation site;
(18)Since its establishment, CBD has spent $200,000 to acquire the cultivation licence and on consultation in relation to project development.
In the period from about May 2021, Mr Rigmany and Mr Donoso had discussions with Mr Blott about the proposal. A draft memorandum of understanding and draft shareholder agreement were prepared but not finalised or signed. The parties discussed a proposal whereby Mr Rigmany and Mr Donoso would, through their companies, invest in CBD and become shareholders of that company. CBD would be restructured so that Phat Stax, Pek and a company associated with Mr McCloud would become shareholders of CBD. Mrs Blott would resign as a director of CBD and Mr and Mrs Blott, as lessors, would enter into a lease with CBD, as lessee, to lease their property at Pages Flat for the purposes of constructing a facility at which the cannabis would be grown. Mr Blott advised Mr Rigmany and Mr Donoso that, as there would be changes to the shareholding of CBD involving the addition or removal of shareholders exceeding a 5% stake, approval was required from the ODC to amend the Licence. Mr Blott said that this process could take some time.
In their claim, the applicants plead that the discussions in the period between June 2021 and November 2022 resulted in a binding agreement which included terms that 40 shares would be issued to each of Phat Stax, Pek and Mr McCloud (the initial agreement). The applicants further pleaded that they were induced to enter into that agreement as a result of the representations set out in the Pitch Deck, which representations were false or misleading. In their closing address, the applicants abandoned reliance on the initial agreement and the claims that they were misled into entering into that agreement. It is therefore not necessary to make any findings concerning those claims.
On 30 November 2022, Phat Stax, Pek and Mr McCloud entered into a written agreement with Mr Blott, Mrs Blott and CBD pursuant to which they would become shareholders in CBD (the 30 November Agreement). Each of the parties executed the 30 November Agreement which was titled ‘Terms Sheet/Heads of Agreement”. The 30 November Agreement was expressed to be a legally binding agreement and the parties all agreed that the agreement was binding.
Attached to the 30 November Agreement and forming part of that agreement was a draft Shareholders Agreement which recorded that Mrs Blott would resign as a director and her 10 ordinary shares would be transferred to Mr Blott, a further 140 ordinary shares would be issued in CBD which would be allotted in the following way: 20 shares to Mr Blott, 40 shares to Phat Stax, 40 shares to Pek and 40 shares to Mr McCloud. Also annexed to the 30 November Agreement was a copy of the proposed lease pursuant to which Mr and Mrs Blott would lease their property at Pages Flat to CBD.
The 30 November Agreement included the following terms:
(1)The parties agree and acknowledge that their objectives are to:
(a)    lodge the Development Application (which was defined as the development application for the construction of a commercial/industrial building at the Pages Flat property);
(b)    proceed with the Development (which was defined as the construction of a commercial industrial building together with all approvals necessary to carry out the Business from the Property);
(c)    lodge the ODC Licence Variation (which was defined as the application to the ODC seeking consent to the new Shareholders holding shares in the Company and carrying on the Business);
(d)    obtain ODC approval (which was defined as approval to the ODC Licence Variation);
(e)    cause the Company Restructure to occur (defined as the restructure described in the annexed Shareholders Agreement);
(f)     execute the Shareholders Agreement;
(g)    execute the Lease;
(h)    carry on the business in accordance with the provisions of the ODC Licence;
(2)the parties agreed to act in good faith towards each other, to co-operate and to otherwise do all things reasonably necessary to bring about the achievement of the objectives described in the previous paragraph (the Objectives);
(3)The parties must as soon as reasonably practicable cause the Development Application to be lodged;
(4)Upon obtaining Development Approval, the parties must, as soon as reasonably practicable:
(a)    commence the Development;
(b)    cause the ODC Licence Variation to be lodged.
(5)Upon obtaining ODC approval, the parties will as soon as reasonably practicable:
(a)    cause the Company Restructure to occur;
(b)    execute the Shareholders Agreement; and
(c)    execute the Lease.
(6)The obligations of Mr Blott and CBD included, during the interim period (which was defined as the period before the matters referred in the previous sub-paragraph occurred), to act diligently, promptly and in good faith in pursing the Objectives and carrying out their responsibilities which included attending to all matters required to further the ODC Licence Variation Application;
(7)The obligations of Phat Stax, Pek and Mr McCloud included acting diligently, promptly and in good faith in pursing the Objectives and paying Mr Blott’s directors fees.

Just prior to November 2022, Mr Rigmany, Mr Donoso and Mr Blott together with an external consultant, Mr Stafford Trowse of Cultural Corp, developed an investor proposal and financial model which updated the Pitch Deck. This proposal was entitled the Seeclan Investor Proposal and Financial Model (the Seeclan Proposal). Seeclan was the proposed trading name for CBD. Mr Blott prepared or was involved in the preparation of the financial and operational assumptions for the Seeclan Proposal. The Seeclan Proposal was prepared for potential investors and stakeholders. The updated profit and loss statement provided for a loss in the FY23 of $579,940 (which was prior to the commencement of trading), net profit (after tax) for the FY24 of $828,527 and then for the following financial years, net profit of over $6-7m. The total capital that was sought to be raised was $3.2m and was to be provided by way of debt, equity or convertible notes.
On 19 December 2022, planning consent was granted by the Alexandrina Council for the construction of the facility at the Pages Flat Property. Building consent was granted on 3 August 2023 and on 13 September 2023, Development Approval was obtained.
On 26 May 2023, Mr Blott lodged an application with the ODC seeking ODC approval to add Mr Donoso, Mr Rigmany and Mr McCloud, because they were to become shareholders of CBD, as authorised persons under the Licence. By email dated 26 July 2023 from Mr Blott to the ODC, sent without the knowledge or consent of Phat Stax or Pek, Mr Blott requested the ODC to put the Licence Variation Application on hold. On 11 August 2023, at a meeting with officers from the ODC, Mr Blott said that he was having difficulty obtaining the required information from directors of Phat Stax or Pek to advance the ODC Licence Variation Application. That was not true. By email dated 16 August 2023 from Mr Blott to the ODC, sent without the knowledge or consent of Phat Stax or Pek, Mr Blott advised the ODC that CBD no longer wished to add representatives of Phat Stax or Pek as authorised persons on the Licence (but wished the application to continue in respect of Mr McCloud) and requested that ODC not communicate with Phat Stax about this issue. On 6 December 2023, without the knowledge of Phat Stax or Pek, ODC varied the licence to add Mr McCloud as an authorised person.
On 29 May 2024, Phat Stax and Pek, through their solicitors, wrote to Mr Blott requesting a report as to the status of the ODC Licence Variation and required that representatives of Phat Stax be noted as authorised persons under the Licence. They received no response to that request.
CBD did not commence carrying on the business of the cultivation of cannabis and did not derive any income from the proposed business.
On 6 June 2023, Mr Rigmany and Mr Blott received an email from Mr Blott requesting that directors fees that were payable to him cease, stating that it was causing too many problems as employment was being sought after elsewhere. On 25 July 2023, Mr Blott sent a notice of default in relation to the alleged failure to pay director’s fees and other breaches. The notice of default required the applicants and Mr McCloud to remedy the alleged default. The applicants denied the breaches.
Determination of claims
The applicants in their claim have relied upon a number of causes of action. During the course of the trial, some causes of action were abandoned. Some causes of action could not succeed. It is therefore necessary to consider each of the separate causes of action pleaded by the applicants.
Breach of the initial agreement
The applicants pleaded that the initial agreement was reached between the parties and Mr McCloud and that the respondents breached that agreement. In his closing address and written closing, counsel for the applicants advised the Court that the applicants did not press those claims.
The initial representations
In their claim, the applicants pleaded that it entered into the initial agreement as a result of a number of representations made in the Pitch Deck which were false or misleading. It referred to these representations as the Initial Representations. In his closing address and in the written closing, counsel for the applicants advised the Court that the applicants did not press the claims consequent upon the Initial Representations.
Claims for breaches of ss 1041E to 1041H of the Corporations Act 2001 (Cth)
The applicants claimed that by making what they described as the Further Representations, the respondents breached ss 1041E to 1041H of the Corporations Act 2001 (Cth). The Further Representations were that by their conduct in putting forward the Shareholders Agreement, the initial agreement and the 30 November Agreement, the respondents represented that they would abide by the terms of the 30 November Agreement.
The claims under the Corporations Act are not made out. The initial agreement and the Shareholders Agreement were circulated well prior to the 30 November Agreement. The circulating of these agreements cannot therefore give rise to a representation, implied by conduct, that a party would abide by the terms of a future agreement which had not even been negotiated at that time. At the time that the initial agreement and the Shareholders Agreement were circulated, the terms of the 30 November Agreement had not been discussed or fixed. Therefore, the only representation that might give rise to the alleged contraventions is that by entering into the 30 November Agreement, the respondents represented that they would abide by the terms of that agreement. The applicants pleaded that the representations were false because the respondents had no intention of complying with their obligations under the 30 November Agreement. The applicants pleaded that this constituted a contravention of ss 1041E to 1041H of the Corporations Act.
The representation is a representation as to a future matter -i.e.,- the respondents will abide by the terms of the 30 November Agreement. Unlike a claim under the Australian Consumer Law, the applicants in a claim for contraventions of ss 1041E to 1041H do not have the benefit of a provision such as s 4 of the Australian Consumer Law which states that a representation as to future matters is misleading if the person who made the representation did not have reasonable grounds for doing so. Section 4(2) deems a person not to have reasonable grounds unless they adduce evidence to the contrary.
In the present case, the applicants have not adduced evidence that the representations were misleading. For the reasons that appear later in this judgment, I do not consider that any inference can be drawn from later conduct of the respondents that the representations were false at the time that they were made.
Further, ss 1041E to 1041H relate to conduct that is misleading or deceptive in relation to a financial product or a financial service. Under s 766A, for present purposes, a person provides a financial service if they provide advice or deal with a financial product. Under s 763A, a financial product is a facility through which or through the acquisition of which, a person does one or more of the following:
(a)    makes a financial investment (see s 763C);
(b)    manages financial risk (see s 763D);
(c)    makes non-cash payments (see s 763E).
Section 764A also provides for specific inclusions in the definition of security. Those inclusions includes shares in a company.
While the shares in CBD are a security for the purposes of s 761A and are therefore a financial product because they are specifically included in s 764A, I do not consider that, as required under ss 10141E to 1041H, the misleading conduct induced the applicant to apply or deal with a financial product or was conduct in relation to a financial product. The words “in relation to” are broad words. However, the alleged misleading conduct relied upon by the applicants was that the respondents represented that they intended to abide by the terms of the 30 November Agreement when they had no intention of doing so because they did not seek to obtain the ODC Approval. That approval did not in any way relate to a financial product or a financial service.
Still further, any claim for loss for contraventions of ss 1041E to 1041H is made pursuant to s 1041I. That section provides that a person who suffers loss or damage by the conduct of another person that was engaged in contravention of those sections may recover the amount of that loss or damage by action against that person or any person involved in the contravention.
For the same reasons as set out in relation to the claim for breach of the Australian Consumer Law, the loss of the opportunity is not a loss that arises by any contravention of ss 1041E to 1041H. It is not a loss that has arisen because of the representations that are said to constitute the misleading conduct but has arisen as a result of the non-fulfilment of those representations.
The claims under ss 1041E to 1041H therefore fail.
Claim for deceit
The applicants have pleaded that the Further Representations give rise to a claim in deceit. To succeed in a claim for deceit, the applicants must prove that:
(1)there was a misrepresentation of fact;
(2)the representor had knowledge of the falsity;
(3)the representor intended reliance;
(4)reliance; and
(5)damage.
In the present case, there is no misrepresentation as to a fact. The representation, properly characterised, is a future representation as to the intentions of the respondents. That is, it is a representation of matters that the respondents will do in the future. Even if that is not correct and the representation can be characterised as a representation as to an existing fact, there is no evidence that the representation was false at the time that it was made, that is 30 November 2022. The only evidence that the representation was false is the conduct of Mr Blott that occurred in 2023 in relation to the ODC Licence Variation Application. That occurred some 6 months after the entry of the 30 November Agreement. It followed after Mr Blott first submitted the ODC Licence Variation Application to the ODC. In those circumstances, I do consider that an inference can be drawn that as at 30 November 2022, the respondents did not intend to comply with their obligations under the 30 November Agreement.
Further, the measure of damages for deceit is the loss suffered by the deceit.[1] In the present case, the applicants have not established that they have suffered any loss. The only financial loss and damage that is pleaded are the payments and loans made by Enduring Group Ptd Ltd (an associate company of Phat Stax) and D & S Resources Pty Ltd (an associate company of Pek) totalling approximately $144,518.16. The evidence from Mr Donoso and Mr Rigmany was that these amounts were loaned by Enduring Group & D & S Resources to CBD and that these companies have instituted proceedings against CBD for the amount owing under those loans. In these circumstances, there has been no loss to the applicants. The applicants also contended that they are at risk of a claim by the Enduring Group and D & S Resources for the repayment of the loans that they have made. There was no evidence of such a liability on the part of the applicants or that they were liable in some way to indemnify Enduring Group and D & S Resources.
[1] Gates v City Mutual Association Ltd (1986) 160 CLR 1; Gould v Vaggelas (1985) 157 CLR 215
The claim in deceit therefore fails.
Claim for misleading and deceptive conduct under the Australian Consumer Law
The claim that is made under the Australian Consumer Law is an alternate claim to those made under the Corporations Act. Section 131A of the Competition and Consumer Act 2010 (Cth) provides that the Australian Consumer Law does not apply as a law of the Commonwealth to the supply or possible supply of a financial service or financial product.
A representation that forms part of a contractual promise may give rise to an implied representation that the party intends to comply with that promise. In Campbell v Backoffice Investments Pty Ltd,[2] French CJ held that it was no answer to a claim for misleading and deceptive conduct to assert that the representation was made in a contractual document. In Futureronics International Pty Ltd v Gadzhis,[3] the Court held:
However, I am persuaded that if there be an unconditional promise which forms part of the contractual obligations, then it is proper to treat the giving of that promise, at least in the ordinary case, as the making of a representation as to a future matter.
[2] (2009) 238 CLR 304; [2009] HCA 25.
[3] [1992] 2 VR 217.
As the alleged representation is of a future matter, s 4 of the Australian Consumer Law is engaged. Section 4 provides that:
(1)    If:
a.   A person makes a representation with respect to any future matter; and
b.   The person does not have reasonable grounds for making the representation;
the representation is taken, for the purposes of this schedule to be misleading.
(2)    For the purposes of applying subsection (1) in relation to a proceeding concerning a representation with respect to a future matter by:
a.   A party to the proceeding; or
b.   Any other person
the party or other person is taken not to have had reasonable grounds for making the representation unless evidence is adduced to the contrary.
Section 4 therefore operates to deem a representation misleading unless the person who made the representation adduces evidence that they had reasonable grounds for making it. In the present case, the respondents have not adduced any evidence that they had reasonable grounds for making the representation. In these circumstances, there were not reasonable grounds for the statement and the statement was misleading. It follows that the respondents have engaged in misleading or deceptive conduct contrary to s 18 of the Australian Consumer Law.
However, I do not consider that the applicants are entitled, because of the breach of s 18, to claim the loss of profits that they contend they would have received had they each held 25% of the shareholding in CBD. Under s 236 of the Australian Consumer Law, a person who suffers loss or damage because of the conduct of another person and that conduct contravenes a relevant provision of the Law, including s 18, may recover the amount of the loss or damage by action against that person or any person involved in the contravention.
The question that arises is whether the applicants are entitled under s 236 to damages for their loss of expectation - i.e., their expectation that if the terms of the 30 November Agreement were performed, they would each receive a 25% interest in CBD. In most cases involving damages under s 236, the measure of damages in tort will be appropriate, that is damages are awarded with the object of placing the applicant in the position that they would have been had the tort not been committed.[4] However, the High Court in Murphy v Overton Investments Pty Ltd[5] emphasised that it was not correct to approach the assessment of damages under s 236 (and its earlier equivalent, s 82 of the Trade Practices Act) by reference to the tort measure of damages although it may provide a useful analogy in suitable cases. The Court went on to say that the words of the section do not warrant any particular approach and to draw principles from contract or torts cases (with the descriptions of expectation and reliance losses) distracted from the principal task of determining what losses were caused because of the misleading conduct.[6]
[4] Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1, 11-12, 14; Warwick Entertainment Centre Pty Ltd v Alpine Holdings Pty Ltd (2005) 224 ALR 134,[94]-[95]; [2005] WASCA 174
[5] (2004) 216 CLR 388, [45]; [2004] HCA 69
[6] Ibid, [44].
In the present case, the applicants have not suffered the loss associated with the loss of the 25% interest in CBD because of the misleading conduct of the respondents. The applicants may have, but have not in the case, lost money or an opportunity because of the misleading conduct. The loss of receiving the 25% interest did not arise because of the misleading conduct – i.e. the promise to do certain things set out in the 30 November Agreement, but rather the actual failure to perform the obligations under that agreement. Therefore, it is not appropriate, in the circumstances of this case, to award expectation damages to the applicants (that is, an amount of damages to compensate the applicants for the loss of the opportunity that they would have obtained had the agreement been performed).
The claim for breach of the Australian Consumer Law based on misleading conduct of the respondents fails.
Breach of fiduciary duty
The applicants have claimed that because of the term in the 30 November Agreement that the parties act in good faith towards each other, co-operate and do all thing reasonably necessary to bring about the achievement of the objectives set out in the agreement, the respondents owed a fiduciary duty to the applicants. The pleaded content of the fiduciary duty said to be owed by the respondents to the applicants does not accord with the proscriptive nature of fiduciary duties confirmed by the High Court in Breen v Williams[7] (the no conflict and no profit duties). Further, the Courts are reluctant to impose fiduciary duties in the context of commercial transactions between parties who negotiated at arms lengths in entering into a contract. In John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd,[8] French CJ, Gummow, Hayne, Heydon and Kiefel JJ held:[9]
…the reason why commercial transactions falling outside the accepted traditional categories of fiduciary relationship often do not give rise to fiduciary duties is not that they are "commercial" in nature, but that they do not meet the criteria for characterisation as fiduciary in nature. The point is illustrated in the Hospital Products case by Deane J's treatment of the distributorship contract between USSC and Mr Blackman's company as follows
"The express term of the contract in the present case requiring the distributor to use its 'best efforts' to build up the market for, and distribute, the products in Australia 'to the common benefit' of both manufacturer and distributor did not, of itself, impose a general fiduciary duty on the distributor to seek no profit or benefit for itself or to disregard its own interests where they conflicted with the manufacturer's. In the context of the term precluding the distributor from dealing in any competing product, the reference to 'the common benefit' was no more than a reflection of the commercial fact that, while the distributorship subsisted, it was in the interests of both manufacturer and distributor that, consistently with ordinary economic restraints on pricing, the market for the manufacturer's product in the relevant area be maximized."
In the Hospital Products case, Mason J spoke in terms consistent with the later discussion of the case by Justice Lehane, and added an important statement of principle which, JACS correctly submitted, governs the present appeal. His Honour said of cases where contract provides the foundation for a fiduciary relationship:
"In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction."
(citations omitted)
[7] (1996) 186 CLR 71.
[8] (2010) 241 CLR 1, 35-36.
[9] Ibid, [91]-[92].
In the present case, the terms of the 30 November Agreement regulate the relationship between the applicants and the respondents. The term of good faith and co-operation are not synonymous with a general fiduciary duty. In Paciocco v Australia and New Zealand Banking,[10] Allsop CJ (Besanko and Middleton JJ), agreeing held:[11]
The usual content of the obligation of good faith that can be extracted from cases such as Renard Constructions, Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91, Burger King Corporation v Hungry Jack’s Pty Ltd [2001] NSWCA 187; 69 NSWLR 558, Alcatel Australia Ltd v Scarcella [1998] NSWSC 483; 44 NSWLR 349, and United Group Rail Services Limited is an obligation to act honestly and with a fidelity to the bargain; an obligation not to act dishonestly and not to act to undermine the bargain entered or the substance of the contractual benefit bargained for; and an obligation to act reasonably and with fair dealing having regard to the interests of the parties (which will, inevitably, at times conflict) and to the provisions, aims and purposes of the contract, objectively ascertained.
[10] (2015) 236 FCR 199; [2015] FCACFC 50.
[11] Ibid, [288].

In these circumstances, there is no justification for the superimposition of a fiduciary duty on the terms of the agreement which is the agreed basis upon which the parties regulated their relationship.
The claim for breach of fiduciary duty therefore fails.
Breach of the 30 November Agreement
The applicants contend that the respondents have breached various terms of the 30 November Agreement. The respondents did not make any submissions as to why the Court should find that they did not breach the agreement. In fact, in his closing submissions, counsel for the respondents accepted that there had been a breach of the 30 November Agreement.[12]
[12] Transcript 107.27, 108.1.
The applicants pleaded that the respondents breached the following terms of the 30 November Agreement:
(1)In the case of all respondents, failing to act in good faith towards each other, to co-operate and to otherwise do all things reasonably necessary to bring about the achievement of the Objectives (as defined)(clause 4.2);
(2)Further, in the case of the Mr Blott and CBD, failing to act diligently, promptly and in good faith in pursing the Objectives (as defined)(clause 6.2.1);
(3)Still further, in the case of Mr Blott, failing to carry out his responsibilities to further the ODC Licence Variation (clause 6.2.1 and Annexure A).
The applicants contended that the respondents breached those terms by:
(1)not obtaining ODC Approval;
(2)not causing the Company Restructure to occur;
(3)not executing the Shareholder Agreement;
(4)not executing the Lease.
All of these matters were Objectives under the definition of that term in the 30 November Agreement. There is no dispute that the respondents did not carry out any of these Objectives.
In the case of the ODC Approval, the undisputed evidence was that the ODC Licence Variation was lodged by Mr Blott (which, if approved, would have added the applicants as Authorised Persons under the Licence). However, without the consent or knowledge of the applicants, Mr Blott advised the ODC that (1) the application should be put on hold; (2) that he was having difficulty obtaining the required information from the applicants to advance the application (which was deliberately false); (3) that CBD did not wish to proceed with the application insofar as it concerned the applicants or the removal of Mrs Blott as an authorised person under the Licence, but wished to proceed to vary the Licnence to add Mr McCloud as an authorised person.
In these circumstances, none of the respondents have taken all reasonable steps to obtain ODC Approval. Reasonable steps would have required the ODC Licence Variation Application to be proceeded with and not unilaterally withdrawn by Mr Blott. The respondents have not co-operated with the applicants to ensure that the ODC Approval was obtained. Mr Blott has clearly failed to act in good faith by advising the ODC of matters that were, to his knowledge, false. These included that he had difficulty in obtaining the required information. He also failed to act in good faith by, without the knowledge or consent of the applicants, withdrawing the application for the licence approval insofar as it related to them becoming Authorised Persons under the Licence. Mr Blott and Mrs Blott were husband and wife and the directors of CBD. Mr Blott was acting on behalf of CBD and Mrs Blott when undertaking those activities. Further, Mrs Blott and CBD did not do all things reasonably necessary to obtain ODC Approval. In fact, they did nothing to obtain that approval.
It follows that all of the respondents have breached clause 4.2 of the 30 November Agreement in relation to the obligation to obtain ODC Approval. Mr Blott and CBD have also breached their obligations under clause 6.2 to act diligently, promptly and in good faith in seeking to obtain ODC Approval.
The Company Restructure, the execution of the Shareholders Agreement and the execution of the Lease did not take place. Each of the respondents were required to take action to cause the restructure of CBD and Mr and Blott were also required to execute the Shareholders Agreement and Lease Agreement. The terms of the 30 November Agreement do not require those actions to be undertaken until the ODC Approval has been obtained. However, the respondents have not acted in good faith towards each other, co-operated or done all things reasonably necessary for the achievement of those matters when they have taken no steps to ensure the ODC Approval was obtained. For the same reasons, Mr Blott has also contravened clause 6.2.1 in relation to these matters as has CBD in relation only to the company restructure.
It follows that Mr and Mrs Blott have breached clause 4.2 of the 30 November Agreement in relation to failing to cause the Company Restructure to occur and failing to execute the Shareholders Agreement and the Lease. CBD has breached clause 4.2 of the 30 November Agreement in relation to failing to cause the Company Restructure to occur. Mr Blott and CBD have also breached their obligations under clause 6.2 to act diligently, promptly and in good faith in failing to cause the Company Restructure to occur and in the case of Mr Blott failing to execute the Shareholders Agreement and the Lease.
Loss occasioned by the breach of the 30 November Agreement
The applicants have framed their claim for loss and damage as a loss of opportunity claim. They have alleged that, but for the breach of the 30 November Agreement, they would have each held 25% of the shares in CBD and that the net equity value of that interest was between $1,169,387.50 and $5,771,208. They further pleaded that they have lost the dividends that they would have received as shareholders of CBD. The claimed value of the loss of opportunity was the estimated equity position of CBD for the financial years 2025 and 2030 respectively (with different amounts for the years in between those dates). The applicants claim that they would have received the dividends set out in the financial projections, updated in September 2024, namely dividends in the sum of $1,463,570 for the financial year 2026 and $3,790.350 for the financial year 2030 (with different amounts for the years between those dates).
The applicants also claimed the loss and damage arising from the risk of claims from Enduring Group and D & S Resources for repayment of the contributions to the working capital. I have already rejected that claim as not being a loss of the applicants.
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 opportunity available to it but that as a consequence of the conduct of the respondents, that commercial opportunity was lost.[13] The applicant does not have to prove on the balance of probabilities that the lost opportunity would have come to fruition.[14] The value of the opportunity is determined by assessing the likelihood of it occurring.[15] The chance of the opportunity must not be negligible. There must be a causal connection between the breach and the loss of opportunity.[16]
[13] BigTinCan Pty Ltd v Ramsay [2013] NSWSC 1248, [95].
[14] Ibid.
[15] Ibid; Sellars v Adelaide Petroleum NL (1994) 179 CLR 332,355; [1994] HCA 4; also Berry v CCL Secure Pty Ltd (2020) 271 CLR 151, [35]; [2002] HCA 27.
[16] Chappel v Hart (1998) 195 CLR 232, [4]; [1998] HCA 55.
It is not a bar to recovery that it is difficult to assess the value of the lost opportunity.[17] Where it is not possible to assess the loss that the applicant might have suffered because the assessment involves speculation, the court must do the best that it can, using common sense and hindsight.[18] As Bell, Keane and Nettle JJ held in Berry v CCL Secure Pty Ltd,[19] the value of the lost opportunity, being an opportunity that has some value and is not negligible, is to be assessed by reference to hypotheses and possibilities, which, though they were speculative and not capable of proof on the balance of probabilities, can be evaluated as a matter of informed estimation.[20] Where damages are difficult to assess because of the conduct of the respondents, it may be appropriate to draw inferences in the applicant’s favour concerning the assessment of that loss.[21] Damages should be assessed in a robust manner having regard to the fact that the respondent’s actions made accurate determination of the loss problematic.[22] Where an applicant is able to, but did not adduce evidence of its loss, the court will be less inclined to engage in estimating damages than in cases where it is impossible for an applicant to adduce precise evidence of its loss.[23] In the absence of readily explicable evidence precisely proving the applicant’s loss, the Court must do its best to assess the probabilities and possibilities involved[24] and the performance of this task may involve a degree of speculation by the Court.[25]
[17] BigTinCan Pty Ltd v Ramsay [2013] NSWSC 1248, [96].
[18] Ibid. McCrohon v Harith [2010] NSWCA 67, [118]; Barescape Pty Ltd v Bacchus Holdings Pty Ltd (No 9) [2012] NSWSC 984, [269]; Sydney Attractions Group Pty Ltd v Frederick Schulman (No 2) [2013] NSWSC 1153, [49]. Ramsay v BigTinCat Pty Ltd (2014) 101 ACSR 415, [5]; [2014] NSWCA 324; O’Hallaron v R T Thomas & Family Pty Ltd (1998) 45 NSWLR 262, 273.
[19] (2020) 271 CLR 151; [2002] HCA 27.
[20] Ibid, [32].
[21] BigTinCan Pty Ltd v Ramsay [2013] NSWSC 1248, [100]; New South Wales v Burton [2008] NSWCA 319, [107]-[108].
[22] Ramsay v BigTinCat Pty Ltd (2014) 1011 ACSR 415, [5]; 2014] NSWCA 32. See also Berry v CCL Secure Pty Ltd (2020) 271 CLR 151, [34]; [2002] HCA 27.
[23] Ibid, [79] citing Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 77 ALJR 768, [6] and [38]
[24] Ibid, [82]; McCrohon v Haith [2010] NSWCA 67, [118]-[112].
[25] Ibid, [82]; State of New South Wales v Moss (2000) 54 NSWLR 536, [71]; [2000] NSWCA 133.
BigTinCat Pty Ltd v Ramsay (BigTinCat)[26] was a case involving the assessment of a loss of opportunity in a case involving a breach of fiduciary duty. The same principles apply to the valuing a loss of opportunity in a case involving a breach of fiduciary duty as a case involving a breach of contract.[27] In BigTin Cat, the opportunity was for a start-up company to develop and exploit a smart phone application. Although a start-up, the company had been established for a couple of years and had some clientele as well as some products that had been approved by Apple, BlackBerry and Google.[28] It had some reputation and experience in the market. That opportunity did not come to fruition, at least in part due to the conduct of the respondents. For the business to commence, there was required to be a raising of capital. There was no history of financial performance upon which the value of the company and the lost opportunity could be assessed. Ball J, at first instance, held that the value of the lost opportunity should be assessed according to the chance of raising the capital of $1.2m. Ball J assessed that chance as 25% and therefore assessed the lost opportunity in the sum of $300,000 being 25% of the capital to be raised of $1.2m.[29] There was no expert report and Ball J did not require one to assess damages.
[26] BigTinCan Pty Ltd v Ramsay [2013] NSWSC 1248, [100].
[27] Ibid, [95].
[28] Ramsay v BigTinCat Pty Ltd (2014) 101 ACSR 415, [6]; [2014] NSWCA 324.
[29] BigTinCan Pty Ltd v Ramsay [2013] NSWSC 1248, [101].
On appeal, in Ramsay v BigTin Cat Pty Ltd,[30] the Court of Appeal affirmed the judgment sum of $300,000 (Gleeson JA dissenting), although it found that Ball J erred in his approach to assessing the loss of opportunity. The loss of opportunity was not the loss of the opportunity to raise capital but the loss of profits that might be derived if that capital was raised. Each of the members of the Court of Appeal held that damages should be assessed according to the projected profits.[31] However, they differed in the way that they made that assessment. MacFarlan JA held that a company’s failure to obtain funding could not of itself be loss suffered by the company and that the recoverable loss was the profit not able to be earned using that funding.[32] MacFarlan JA held that it was impossible for the appellant to adduce precise evidence of it loss. The anticipated profits were to be earned by the exploitation of new technology. The appellant in the case could not have done more to prove its case than to lead evidence from a person in the industry or considering entering the industry who took the view that the applicant’s business had a worthwhile prospect of success. McFarlan JA held that the task was a subjective one but had regard to:
(1)the profit projections that had been prepared;
(2)the fact that experienced business persons with relevant expertise had pursued the business venture over a lengthy period of time;
(3)the fact that the respondents were prepared to go to the lengths of acting in an underhand manner to preserve and pursue the opportunity.
[30] (2014) 101 ACSR 415; [2014] NSWCA 324.
[31] Ibid, [7]-[8], [70].
[32] Ibid, [70] citing Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25, 42 and 51 and OzEcom v Hudson Investment Group [2007] NSWSC 719, [279]-[298].
MacFarlan JA arrived at the figure of $300,000 without applying any specific discount but expressly took into account the very significant business contingencies.[33] MacFarlan JA disagreed with Gleeson’s JA use of projected net profits of $650,000 as the parties were contemplating far greater returns than $650,000.[34] He also disagreed with the assessment of the prospects of success of the business as being assessed at 10%. He said that the parties would not have committed the time and effort if they had made that assessment of the prospects of success.[35]
[33] Ibid, [84].
[34] Ibid.
[35] Ibid.
McColl JA agreed in valuing the loss of opportunity in the sum of $300,000 but held that an alternate profit projection (that was greater than the $650,000 used by Gleeson JA) should be adopted.[36] Gleeson JA (dissenting) assessed the loss of opportunity in the sum of $65,000 being 10% of $650,000.[37] He held that the prospects of two tranches of successful pre-IPO capital raising as well as the IPO funding also achieving significant earnings in the relevant financial year were very low.[38] He was not prepared to make any assumption after the first year of the business and said that to do so would be simple speculation.[39]
[36] Ibid, [7].
[37] Ibid, [139].
[38] Ibid, [139].
[39] Ibid, [138].
As to causation, there is a causal connection between the breach and the loss claimed by the applicants. The loss claimed is the loss of the shareholding in CBD. That loss was caused by the respondents failing to comply with the terms of the 30 November Agreement and seek to obtain the approval of the ODC to the variation of the terms of the Licence so as to permit the restructure of CBD to proceed and the applicants to become shareholders. Although the application to vary the terms of the Licence was submitted to ODC, Mr Blott deliberately took steps to withdraw that application so it could not proceed. Under the terms of the 30 November Agreement, the transfer of the shareholding could not take place until the ODC approval occurred.
The respondents submitted that the loss was caused by the failure on the part of the applicants to pay the director’s fees to Mr Blott. That submission is rejected. Mr Blott received director’s fees for some, but not all, of the period described as the interim period under the 30 November Agreement. The circumstances surrounding the failure to pay director’s fees for some of that period are not clear. On 6 June 2023, Mr Blott requested that director’s fees not be paid. It was on 26 July 2023 that Mr Blott first took a step to prevent the ODC Licence Variation being approved. There was no evidence that the failure to pay director’s fees was a breach of the 30 November Agreement. Even if a breach had been established, such a breach does not excuse the respondents from continuing to comply with its obligations under the 30 November Agreement, including obtaining the approval of the ODC to the variation of the Licence. Still further, even if the failure to pay director’s fees was a breach of the 30 November Agreement, it could only, at its highest, excuse future performance. However, the acts of Mr Blott were positive acts and therefore went beyond a failure to act. Lastly, even assuming that there was a breach by the applicants in failing to pay director’s fees (which is contrary to the findings above), it is sufficient that the applicants establish the breaches caused by the respondents were a cause of the loss notwithstanding that there may have been other concurrent causes.[40]
[40] Alexander v Cambridge Credit Corp Ltd [1987] 9 NSWLR 310, 315.
As to the value of that loss of opportunity, it is clearly difficult to assess the value of that opportunity. The Court should therefore approach this assessment in a robust manner. The actions of the respondents in not obtaining the ODC Approval (because they deliberately withdrew that application for the variation of the licence without the knowledge or consent of the applicants) have made that determination problematic because that meant that the business did not commence cultivating and selling cannabis. In these circumstances, it is readily explicable that the applicants were not able to prove their precise loss and therefore the Court must do its best to assess the probabilities and possibilities involved.
The applicants did not adduce any expert evidence. They contend that in circumstances where the business had not been carried on and involved a start-up company, the expert could do no more than the Court in making estimations as to the possible future profits of the business. The best that the Court can do, as did the Court at first instance and on appeal in BigTinCat, was to make an estimation, based on the projected profit and loss statements, significantly discounted for contingencies.
I do not consider that the lack of expert evidence precludes the Court from making an estimation as to the damages that have been sustained as a result of the breach of the 30 November Agreement. In Commonwealth v Amann Aviation Pty Ltd,[41] Mason and Dawson JJ referred to authorities that suggested that sometimes the assessment of damages involved what was guess work rather than estimation and that where precise evidence is not available, the court must do the best that it can.[42] This was a reference to the statement of Devlin J in Biggin & Co Ltd v Permanite Ltd.[43] In State of New South Wales v Moss,[44] Heydon JA referred, with approval, to the decision of Bowen LJ in Radcliffe v Evans[45] that as much certainty and particularity must be insisted upon in the proof of damages as is reasonable, having regard to the circumstances and nature of the acts by which the damage is done. When the evidence fails to provide any rational foundation for a proper estimate of damages, the court should decline to make an estimate.[46]
[41] (1991) 174 CLR 64, 83; [1991] HCA 54.
[42] See McCrohon v Harith [2010] NSWCA 67, [118].
[43] [1951] 1 KB 422, 438
[44] (2000) 54 NSWLR 536, [72]; [2000] NSWCA 133 referred to in McCrohon v Harith [2010] NSWCA 67, [119].
[45] [1892] 2 QB 524, 532-233.
[46] Schindler Lifts Australia Pty Ltd v Debelak (1989) 89 ALR 275, 319; [1989] FCA 311,referred to in McCrohon v Harith [2010] NSWCA 67, [121].
In the present case, the applicants have provided as much evidence as is reasonable to provide a proper and rational basis for the estimation of the value of the loss of opportunity. The applicants claim that they have each lost the value of a 25% interest in CBD together with dividends that they would have received if they held that interest. As the business of CBD had not commenced, the Court can only estimate what was lost having regard to the evidence before it which included the steps that had been taken in preparation for CBD to carry on the business, the financial projections and the experience of the parties.

The first piece of evidence that is relevant to the assessment is the Pitch Deck prepared by CBD. It is a document prepared for investors and therefore it is reasonable to infer that it was prepared carefully and honestly and the statements made in it were true (insofar as the dealt with factual matters) and were honestly held. Further matters contained in the Pitch Deck relevant to the estimation of loss were (1) CBD had the relevant licence to cultivate cannabis for medicinal purposes; (2) CBD had been achieving milestones to date; (3) the construction of the facility had been costed; (4) CBD had achieved key relationships with local research organisations and was in the final talks with companies to secure key R & D arrangements; (5) CBD had partnered with a local technology company to develop a product worth $10m per annum; (6) Australia’s medicinal cannabis market was projected to be worth $2 billion dollars and CBD aimed to capture 1.0% of that market at $200m by 2025 (that calculations appears incorrect); (7) those involved in CBD had experience with cannabis cultivation and business; (8) CBD had spent $200,000 to acquire the cultivation licence and for consultation on the project; (9) net income for FY 2021-22 was projected to be $1,614,779 and for FY 2022 was $4,335,881. It increased rapidly after that date.
Secondly, CBD had obtained a medical cannabis licence.
Thirdly, Mr Rigmany and Mr Donoso also had significant business experience which included the delivery of projects and investment in marketing and construction companies and joint ventures.
Fourthly, Mr Rigmany and Mr Donoso spent some time evaluating the project and its risks. They later spent some time with Mr Blott to get a better understanding of the project, raising concerns about the project and questioning the financial projections including the assumptions regarding market share, operating costs and anticipated growth rates. They prepared, in conjunction with an external consultant, further financial modelling and undertook steps to raise further capital. Meetings were held with employees from government agencies.
Fifthly, a number of external consultants were engaged and negotiations conducted with third parties. These included: (1) preparing the design for the construction of the facilities with Mr Matthew Mammone of Gama Consulting; (2) town planning preparations with Josh Skinner of URPS; (3) branding and marketing activities with Stafford Trowse of Culture Corp which included the preparation of the Seeclan Proposal for potential investors; and (4) engineering and consulting activities with Matthew Mammone of Gama Consulting.
Sixthly, Mr Rigmany and Mr Donoso, through related companies, arranged for working capital to be provided to CBD and/or consultants totalling approximately $144,000.
Seventhly, a site had been identified for the construction of the facility and was available, namely the property of Mr and Mrs Blott at Pages Flat. Development approval had been obtained for the construction of the facility.
Eighthly, Mr Blott was prepared to engage in deliberate conduct that had the effect of preventing the applicants from obtaining their collective 50% interest in CBD, which had the consequence that he and his wife’s interest in CBD would not be diluted by the issue of those shares.
The above are matters that provide a basis for a finding that there was a reasonable possibility that CBD would operate the business, and the projected net profit would be obtained.
On the other hand, before the business of CBD could commence, there needed to be a successful capital raising of about $3.2m. If that capital raising was successful, it is probable or at least possible, that some of the money invested would be way of equity, such that the equity holdings of the applicants would be diminished. However, if the equity increased, the amount of interest payable would decrease. The facility used for the cultivation of the cannabis would then need to be constructed. Costs may overrun. After these tasks were undertaken, the cultivation and trading activities of CBD could commence. There was an inherent uncertainty as to the profits that would be derived from the business of CBD.
The best that the Court can do, as did the Court of Appeal in BigTinCat, is to make an estimation, based on the projected profit and loss statements, significantly discounted for contingencies. In the Pitch Deck (which was prepared sometime prior to May 2021), the forecast net profit for the first year of operations, being the FY22, was $1,614m. In fact, it is clear that events had overtaken this forecast as no operations had been undertaken and no income derived by the end the FY 2022. In these circumstances, the later forecasts made during 2022 provide a better basis for determining the projected net profit of CBD. In the Seeclan proposal, the projected net profit for the FY24 (being the first year of operations) was projected net profit after tax of $828,527, which includes an allowance for interest expense of $320,000 and tax of $298,721. Gross revenue was $3,042,945. In the FY25, gross profit was projected to rise to $11,380,079 and net profit to $6,623,993.
I consider that such a massive increase in gross revenue and net profit for FY25 to be pure speculation. There was no evidence explaining that increase. The profit and loss statements for FY25 and beyond do not provide a proper basis for the determination of the loss sustained by the applicants in not receiving the 25% interest in CBD that each of them was entitled to under the 30 November 2022 Agreement. There is no rational basis to form the view that there would have been such a massive increase in sales and revenue.
I therefore consider that the FY24 projections should be used for the estimation of loss. The net profit figure of $828,527 should be used as the basis for the estimation. A discount for the contingencies that I have described in these reasons should be applied to this figure. The applicants accepted that it was appropriate to apply a discount to the projected figures but submitted that discount should take into account: (1) the projected profits; (2) the money spent by CBD in furthering is business; (3) the actions taken by the respondents in furthering the business including identifying the site for the business, the partnerships that it had formed with third parties and taking steps to secure that site, and steps to identify suppliers and purchasers of product; and (4) the expertise of Mr Blott in the area.
Those matters are all proper matters to take into account. Notwithstanding those matters, I consider that it is appropriate to discount that figure for contingencies so as to make an estimation of value based on 30% of the projected net profit of $828,527. It is appropriate to apply that discount because CBD was a start-up company and had no history of revenue or expenses, there was a requirement for capital raising, which was essential to the business being conducted and which had not taken place and might not be successful, the projected share of the market might not be achieved and therefore the sales that were projected might not be made, and the expenses, including the costs of contrasting the facility, might exceed the projections.
I estimate that the CBD had a 30% chance of assess of obtaining the forecast profit of $828,527 for the FY24 but for the breach of 30 November Agreement. The value of that lost opportunity to CBD was $248,558 (30% of $828,527). The value of that lost opportunity to the applicants is in the sum of $124,279. Each of the applicants held a 25% interest in CBD so it therefore appropriate to estimate the value of each of the interests that they lost in the sum of $62,139.
As a check, the applicants procured their associated companies to spend some $144,518.16 on working capital and payment of expenses of consultants. CBD had itself stated in the Pitch Deck that it had spent $200,000. The Licence had been obtained by CBD from the ODC. The premises had been identified and were available and development approval obtained. The parties had themselves spent considerable time developing the business. In Commonwealth v Amann Aviation Pty Ltd, [47] the Court held that the applicant was entitled to reliance damages based on a rebuttable presumption that the net benefits to which it would have been entitled had the contract not been rescinded would have been sufficient to cover the expenditure which it would have incurred pursuant to the contract. Although that presumption does not apply to the present case, the reasoning behind the presumption provides some comfort that the assessment of damages is reasonable.
[47] (1991) 174 CLR 64.
Conclusion
For the reasons that I have expressed, there will be judgment in favour of each of the applicants in the sum of $62,139.50. I will hear the parties as to costs and interest. I have previously indicated that in determining costs, I will also determine what costs should be ordered in respect of the mediation, which was the subject of a separate application for costs by the applicants. It is appropriate that this application be determined following the delivery of this judgment and at the time that any costs order is made in respect of these proceedings.