Placer (Granny Smith) Pty Ltd v Thiess Contractors

[2002] HCATrans 340

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth  No P60 of 2001

B e t w e e n -

PLACER (GRANNY SMITH) PTY LTD

Appellant

and

THIESS CONTRACTORS PTY LTD

Respondent

GLEESON CJ
McHUGH J
KIRBY J
HAYNE J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

CANBERRA ON TUESDAY, 10 SEPTEMBER 2002, AT 10.16 AM

Copyright in the High Court of Australia

MR J. GILMOUR, QC:   If the Court pleases, together with MR C.M. DUNCAN, I appear for the appellant.  (instructed by Mallesons Stephen Jaques)

MR D.F. JACKSON, QC:   If the Court pleases, I appear with my learned friend, MR P.G. CLIFFORD, for the respondent.  (instructed by Hollingdales)

GLEESON CJ:   Yes, Mr Gilmour.

McHUGH J:   Before you start, Mr Gilmour, I informed the parties yesterday that I hold shares in Leighton Holdings, and Thiess Contractors, to the best of my recollection, is a subsidiary of that company.  I put it on record.

CALLINAN J:   Mr Gilmour, I should say that before I was appointed I was on the board of a company which was engaged in a dispute with Thiess.  There was to be an arbitration; it was pending; I am not sure what happened to it but I should just mention that.

MR GILMOUR:   I say, in relation to your Honour Justice McHugh that I think you mentioned that on a previous occasion.  I did not then and it does not now occasion us any difficulty and neither does what your Honour Justice Callinan just put to me.

GLEESON CJ:   Yes, Mr Gilmour.

MR GILMOUR:   Your Honour, we have two motions to amend.  The first ‑ ‑ ‑

GLEESON CJ:   Are they opposed, Mr Jackson?

MR JACKSON:   No, your Honour.  

GLEESON CJ:   Yes, you have that leave.

MR GILMOUR:   I am obliged to your Honour.  Your Honours, if this Court finds that it was open to the trial judge to assess the damages in the way that he did it will be necessary, it seems, only to consider whether, from an evidentiary standpoint, the point was reached where an evidentiary burden shifted to the defendant in the counterclaim against Thiess.  It appears from their submissions that they accept that in a case such as this that an evidentiary burden may lie, the question being whether in this case it did lie.  It is necessary, therefore, on the question of whether the approach the trial judge was procedurally open as a matter of fairness, to Thiess that is, to consider both the method that he employed and the method that Placer pleaded and ran at trial.

Our short submission on that point – and it goes to not only the procedural fairness question but indeed the ground, which is now ground 2, dealing with the way that the case was conducted and the finding of the Full Court at paragraph 177 of its reasons.  It also goes to the question of whether the matter should be remitted back to the trial judge on the question of damages, that is to say, if it was not procedurally open, then it should have gone back, and if it was procedurally open, then there is no need to send it back.  Can I begin by, as it were ‑ ‑ ‑

KIRBY J:   It was agreed at the special leave hearing that this Court could not proceed to reassess the damages.

MR GILMOUR:   Quite so, and we do not ask the Court to do that, with respect, your Honour.  Our primary submission is that the approach of the trial judge was quite open to him and the assessment which he made is one which this Court can restore.  We do not ask the Court to reassess the damages.

KIRBY J:   And your proposal is that it be reassessed on the evidence that you called in the first trial or do you want to have a second bite at the cherry?

MR GILMOUR:   We will have to persuade your Honours that the way that the trial judge approached the assessment and the evidence which he relied upon in that approach proceeded in principle identically to the way that we asked the court to assess damages, although the evidence relied upon was different, but it was, in the end, cogent evidence and in an important aspect the evidence called by Thiess ‑ ‑ ‑

KIRBY J:   But that does not answer my question.  You are not seeking to enlarge the evidence?  This would be a determination by the primary judge on the basis of the evidence that you called in the first trial?

MR GILMOUR:   Yes.

KIRBY J:   Because it was a long trial and there was a lot of evidence and on one view of the matter you should not have a second chance to enhance the record.

MR GILMOUR:   Yes, we appreciate that point.  I was going to go on to say, your Honour, if we do not persuade you that there was evidence on which the trial judge was able to rely upon for his assessment, then it may be, nonetheless, that given that the Full Court determined that in such a case with such blatant breaches which obviously resulted in damages of a considerable extent, that having considered whether it should go back, that it should go back, if you are not satisfied as to our primary submission.

GLEESON CJ:   Mr Gilmour, I think something was said about this on the special leave application, but on page 1171 at line 10 the Full Court speculated about the possibility that there was in truth evidence:

That would enable a damages figure to be assessed –

in the manner in which Placer sought to have them assessed at trial, but the Full Court said they did not really know whether there was such evidence or not.

MR GILMOUR:   That is so.  That is the last line in paragraph 198 at 1171.

GLEESON CJ:   Yes.

MR GILMOUR:   But the reason, your Honour, that they did not send it back was not because of that; it was because what it describes as the fatal fallacy.

GLEESON CJ:   I understand that, but what I wanted to ask you was this:  should we disregard the possibility that such evidence exists on the basis that if it existed, you would have told us about it by now?

MR GILMOUR:   Your Honour, our submission will be that, properly understood, the judge did have regard to evidence which was before him which cured the problem that he had with the project forecasts, which was that body of evidence that Placer had sought to rely upon.

GLEESON CJ:   As I understand it, one of the fallacies that the Full Court found in the way the trial judge approached the matter was that they said, for a variety of reasons, the profits that he attributed to productivity gains and one other matter were highly unlikely to have represented the full extent of the unrelated profits that were actually derived by Thiess.  In those circumstances the figure that he came up with must have been wrong and there was no basis on which the right figure could be calculated.

MR GILMOUR:   What that proposition misconceives, your Honour, is that at the trial the contest was and the findings were that the substantial excess profit was not to be found on the directed issues such as productivity gains or cost overruns or underruns, but rather that component of the rates that were provided to Placer which contained profit disguised as costs.  Both evident from the pleadings and from the findings of the trial judge, that inflated component of the rates was reckoned in millions of dollars.  That was the main contest at the trial, namely whether Thiess was entitled to have added as costs to the figure which the internal plant department had fixed as the operating costs for the plant and equipment.  That is where the substantial damage is found, not in the productivity gains, not in cost overruns.  They were, in context, rather minor.  His Honour only allowed $500,000 in relation to productivity gains and $100,000 for a cost overrun.

You see, at trial, Thiess came to the court and said, “Yes, we did” ‑ they did not like the word “inflate”, but I use it non‑pejoratively ‑ “Yes, we did add to the rates that the internal plant requirement provided, but we were entitled to do that”.  Those were rates which Placer agreed to; there was a basis for doing it; there were weeks of evidence on that; but, in the end, all of that was rejected.  These are the substantial features, and these are the features which, visited on any viewpoint, whatever is said about productivity gains, or not said about it, or cost overruns or underruns, inevitably and inexorably, those breaches led to damages in the millions. 

GLEESON CJ:   The overstated rates related to one aspect only of the work, did they not? 

MR GILMOUR:   No, with respect.  That is another misconception on the part of the Full Court.  The uncontested evidence plainly was that in areas where there was plant and equipment ‑ the rates were provided under the mining contract, which involved plant and equipment ‑ whether it was what was known as the excavate, load and haul base rate, or the drill and blast base rate, or ancillary equipment.  All of these involved the use of plant and equipment.  On any view, it was the use of the plant and equipment during the mining contract which constituted the most significant part of the costs. 

GLEESON CJ:   Was the cost of all the plant and equipment overstated? 

MR GILMOUR:   No, your Honour.  We were able to establish that substantial overstatements had been made in relation to much of the equipment.  For example, if you just take the fleet of trucks that hauled the dirt and the ore from the mine, the 777s and the 785s, we were able to establish that there was substantial inflation of those rates.  Nine trucks, across a year; $40 an hour was the inflated component – something like 4000 hours a year times nine trucks.  You do not have to go beyond that to see the comparative size of the damage suffered by Placer from that source ‑ which has nothing to do with, and cannot be affected by, questions of productivity gains or cost overruns. 

GLEESON CJ:   In all events, coming back to this passage on page 1171, are you inviting us to deal with the case on the basis that there was evidence

of a kind about which the Full Court speculated in paragraph 198, or should we deal with the case on the basis that we can disregard the possibility that there was such evidence?

MR GILMOUR:   We ask the Court to treat it on the first basis, that there was evidence, namely there was evidence which dealt with the central problem which the trial judge had with the project forecasts.  I had proposed, your Honour, in developing our submissions as to the two methods and how they compare, to, in due course, come to that.  I still propose to do that unless you want me to deal with that now.

GLEESON CJ:   Yes, you take your own course.

MR GILMOUR:   Yes, thank you.

MR JACKSON:   Your Honours, I am sorry to interrupt my learned friend, but may I say we would seek to object to the course that my learned friend just indicated being adopted in these proceedings, because this was not an issue in the Full Court in Western Australia at all.  Your Honours will see that from page 1170 lines 10 to 12, where it was said:

Placer seeks merely to support the alternative approach that the learned Judge adopted to its damages claim.

And the sentence preceding that.  Your Honour, I am having it checked.  I do not think there was a ground of appeal to the Full Court trying to support the original basis.

GLEESON CJ:   There are were apparently hundreds of grounds of appeal to the Full Court and everybody agreed to disregard the notice of appeal.

MR JACKSON:   Your Honour, I am sorry, that was mainly with us, I think, rather than the other side.

GLEESON CJ:   All right.

KIRBY J:   But that does not create any constitutional or legal problem for our dealing with it on this new basis, does it?  It is still ‑ ‑ ‑

MR JACKSON:   It is a matter in respect of which, really, should have been the subject of special leave, in our submission.  The issue should have been the subject of special leave and a factor in relation to which would be that the issue was not pursued beyond the trial.

GLEESON CJ:   It is probably most convenient for us to hear what Mr Gilmour has to say and you can press that objection when you come to it.

MR GILMOUR:   Perhaps before I leave that, your Honour, I should say that I may have been at cross‑purposes not having, when your Honour the Chief Justice took me to 1170, read the beginning of paragraph 198 at 1170.  That paragraph, of course, is dealing with the Full Court’s treatment of whether it should go back on the basis pleaded by Placer, rather than the basis upon which the trial judge approached the assessment.  My answer to your Honour’s questions were intended to be that the method employed by the trial judge was open and that he relied upon evidence which cured the problem that he had with the project forecasts, which was the document relied upon in relation to the way Placer pleaded it, I think.

Can I start, your Honours, by making it plain ‑ and this really develops the point that I made about the inflation of the plant rates ‑ that at 1155 ‑ that will be volume 5 ‑ at paragraph 153  ‑ ‑ ‑

KIRBY J:   I am still not clear, though it is no doubt my own fault, for not understanding  ‑ ‑ ‑

MR GILMOUR:   I am sure it is not, your Honour.

KIRBY J:    ‑ ‑ ‑ whether or not your proposal is that the matter goes back to the trial judge, the trial judge who conducted the first trial, on the basis only of the evidence that was called at the first trial, perhaps supplemented if there were any minor matters by any later developments that he gave leave.  But, is that what you have in mind or is it an entirely new trial, or a substantially new trial on damages?

MR GILMOUR:   No.  Your Honour, I hesitate to give you a qualified answer but, depending on the view that this Court takes ‑ ‑ ‑

KIRBY J:   So far you have been very careful not to give me an answer at all.

MR GILMOUR:    ‑ ‑ ‑ that this Court takes to the evidence to which we will point which we submit cured his Honour’s defect or the problem he had with Placer’s approach.  If your Honours agree with us that, indeed, the trial judge did have regard to such evidence, then that is really an end of it and there is no need for any additional evidence, for example, to be called, but if your Honours took a different view as to what his Honour intended, then it may be that some supplemental evidence would be required.

If I can start, your Honours, as I say, at page 1155, paragraph 153 of the Full Court’s reasons, because that, calling upon the findings of breach, sets plainly in context the basis of the award of damages, namely that it was:

entitled to damages for breach of contract represented by the difference between the remuneration paid by it to Thiess and the remuneration it would have paid had Thiess not breached the contract. On the evidence, the remuneration Placer would have paid had Thiess not breached the contract is to be calculated by reference to the plant department rates.

So the foundation of the assessment of damages goes to, as the primary position, the question of the differential of rates.  Productivity gains and cost overruns come later and they come at the point at which the trial judge, having isolated and identified and upon evidence, in our submission, established what he described as the excess profit, namely profit above 5 per cent, was there any other basis or explanation for why Thiess earned more than 5 per cent?  So, it was very much, in our submission, a secondary issue at the trial.  It became, rather, the focus of issues on the appeal but that is only because, with respect, of the unassailable findings by the trial judge, affirmed by the Full Court, that the differential rates were not amounts to which Thiess was entitled.

Can I just point out to your Honours, without necessarily having to go through them, that the relevant contractual provisions which his Honour the trial judge obviously had regard to are to be found at pages 1118 through to 1122.  It is dealt with most helpfully by the Full Court as to the construction of the relevant provisions at paragraphs 22 to 35 of their Honours’ reasons.

It is important to understand the contractual theory, which was that Thiess was entitled to a profit of 5 per cent on costs.  That is the, I think, indisputable effect of the contract.  However, because the rates which were provided for under the contract were arrived at using an estimate of future costs, there was always the possibility that the actual costs, as the mining developed, were going to be either greater or lesser than the estimated costs.  It was incumbent upon Thiess in the formulation and derivation of rates to provide genuine estimates of future costs.  That was the core of the case, that they had not done that, and these were the kernel findings against Thiess.  As the Full Court found in, I think, around paragraph ‑ ‑ ‑

KIRBY J:   Do I understand that the flaw in the estimates was that they included significant components for profit?

MR GILMOUR:   Correct.

KIRBY J:   And that that was not just a slip?

MR GILMOUR:   No.  I was not proposing to take your Honours to the findings but the gist of the findings is that in a fairly cynical and consistent way Thiess insinuated into the rates, for example, for the trucks that I mentioned earlier, an operating rate per hour which was far in excess of the genuine estimate.  The genuine estimate was found by his Honour the trial judge and affirmed by the Full Court to be the rate provided by Thiess’ internal plant department to its operation in Western Australia at site.

So what would happen is that the internal plant department would fix operational costs for the equipment.  It would effectively – in quotes…..there was that plant and equipment to site for that project.  That project would be responsible for paying those costs to the internal plant department whose policy was to seek to break even.  So it was a non-profit making internal equipment hire organisation, if you like, within Thiess.  But what Thiess then did at site, through its managers responsible for the contract at Granny Smith Mine in Keringal, was to add to those rates.  For example, if you take the 777 and 785 trucks, the amount that was added was $40 an hour. 

Now, the evidence before the court was that there were eight or nine trucks working about 4,000 hours a year, across three years, in what is called the new contract.  That is from 1992 to 1995.  So just from that one breach, or series of breaches, alone one can see that the damage is reckoned in millions.  That was the problem, of course, that one knew that one was dealing with breaches that visited that amount of damage.  The question was how to, within reasonable terms, calculate the amount of the damages.

GLEESON CJ:   Now, what do you say about what the Full Court said on page 1159?  They said the proper and reasonably obvious way of going about this calculation was as they set out in paragraph 165.  They said that this trial went off the rails because nobody ever attempted to do that.  Now, that may give rise to some interesting questions about onus of proof, but what you say about their proposition as to the orthodox method of assessing damages?

MR GILMOUR:   We say a number of things about that, your Honour.  Firstly, it was never a matter raised at trial by either party.  It was never said by Thiess that that was the orthodox or correct method of proving damages.  Beyond that, it is on any view, in our respectful submission, a counsel or a judgment of perfection.  There was no evidence, for example, that this highly complex method that the Full Court settled upon having heard oral submissions for the first time from Thiess’ counsel in the Full Court that this was what should have happened.

There was no evidence, for example, that it could have happened but what would have been required, your Honour the Chief Justice, was that the entire contract in terms of its costings and billings would have required to have been recalculated, plus it would have at pre‑trial have had to have fixed upon particular rates for particular items of equipment, bearing in mind that – without assuming too much about your Honour’s knowledge of mining – that even at one bench, at one level of this mine, for one item of equipment such as trucks, you might have different rates because some of the dirt might be going to waste, some of the ore would be going to stock, some of the ore would be going to the crusher.

Now, if that had been done ahead of the trial and Placer had failed, given that essentially it was a fraud case, not easy to prove, and took weeks and weeks of cross‑examination and distillation of evidence to come to particular figures.  If we had failed in relation to any of those figures at trial then this complex reconstruction of the effect of using genuine estimates rather than inflated estimates, it would have unravelled.

GLEESON CJ:   You put your arguments in the course that is convenient to you but I just want to draw your attention to the fact that in paragraph 165 you find a key part of the reasoning of the Full Court which is that this is the way it should have been done and, by implication ‑ which may be right or may be wrong ‑ this is the way it could have been done and, in particular, could have been done by Placer.  Now, if you are attacking the process of reasoning of the Full Court sooner or later that would be a handy point at which to strike.

MR GILMOUR:   The submissions that I have made so far, your Honour, deal with the way in which that matter emerged.  It is no more than an approach which the Full Court decided as a theoretical approach would have been a better way to have assessed damages.  It does not, in our submission, amount to a finding that the method employed by the trial judge was not open.  Indeed, even in hindsight, in our respectful submission, the approach of the Full Court is extraordinarily complex and open to, as I say, unravelling unless all of the specific components of inflated rates across the entire fleet of equipment across the entire length of the contract were accurately predetermined prior to the trial.

GLEESON CJ:   Is it part of your argument – I do not want to put an argument into your mouth, but is it part of your argument that if that approach were to be taken it would depend upon information which was peculiarly within the possession of your opponents?  I do not know whether it does or not but it is a question that occurred to me.

MR GILMOUR:   Your Honour, in answer to the question, as to what was in each case the precise quantum of the inflated cost for any particular item of equipment, then, yes, necessarily that information was in the hands of Thiess.  They were the offers of the inflated amounts.

CALLINAN J:   But did you get those on discovery?

MR GILMOUR:   Get those on discovery.  There was a morass of documents, Justice Callinan, from which by the process of very complex analysis and lengthy and detailed cross‑examination we sought to establish that there had been some level of inflation, some level of addition to the rates and we were successful on that but there was no material from which you could successfully identify the rates that should have been used.  But, in any event, your Honours, we say it is not the only method of doing it.

CALLINAN J:   I do not think the Full Court says it necessarily is either.  They simply say, as I read it, that there would not have been any argument had that method been adopted.

MR GILMOUR:   I think that is, with respect, what the Full Court in effect has said.  You get some insight into that perhaps by going to 177 where the Full Court deals with the submission that was put by Placer before the Full Court resting, as it did, upon a finding by the trial judge – that is at 1162 – where they refer to his Honour’s statement that:

It is not suggested by Thiess that its increased profitability resulted from anything other than the differential rates and improved productivity.

That, without saying it, was his Honour, in our submission, looking at the question of the evidentiary burden.  The Full Court then, at the foot of that page, said:

In other words, his Honour was of the opinion that Thiess impliedly accepted that the profits made by it did not result from anything other than the inflated rates and improved productivity (to the extent alleged by it).  The validity of his Honour’s overall approach rests on this view.  Mr Ainslie –

who was junior counsel for Placer on the appeal –

submitted that the learned Judge was justified in this conclusion as Thiess conducted its case on this basis.  We accept that, where this submission to be upheld, the existence of other sources of profit would be immaterial.

That, with respect, was the Full Court saying – and that is ground 2 in our grounds of appeal – that if the case was conducted on that basis, then the trial judge – his approach was open.

HAYNE J:   Can I, at the risk of tempting to unduly simplify this case, take you back a logically prior step, Mr Gilmour.  For the moment it is not clear to me exactly what it is that you say constitutes the breach – there was a series of breaches – but what it is that you say constitutes the breach.  Can you encapsulate that in a single sentence?  What is the breach?

MR GILMOUR:   The breach, generically, in contract was that under its obligation pursuant to the contract – that is under section C dealing with compensation – to derive rates which were then used to set the base rates for the purposes of Thiess being compensated for the work, tied together with the obligation of good faith, found I think in clause B 1.1.5, that Thiess ‑ ‑ ‑

HAYNE J:   I understand you to be saying the breach was a failure to set rates properly; is that right?

MR GILMOUR:   Correct.

HAYNE J:   The failure to set rates properly was a failure to set them in good faith, whatever that may add; is that right?

MR GILMOUR:   Correct.

HAYNE J:   And the want of good faith was a failure to set them at what were Thiess’ genuine – much may turn on what is meant by that – genuine pre‑estimate of costs to be incurred; is that right?

MR GILMOUR:   Correct.

HAYNE J:   If that is so, if that is the breach, of what importance is it to understand what profit Thiess might in fact have made from the conduct of this contract?

MR GILMOUR:   It is relevant in this way, your Honour, that whilst the revenue to be derived by Thiess proceeded from rates based on pre‑estimates of costs, that the proper construction of the contract, having regard to the review provisions that you find for reviewing the rates and in line with the finding of the trial judge and the Full Court, was that although there might be at any one time prior to a review either a greater or lesser cost than the pre‑estimate, that the quarterly reviews – and in the case of load and haul, the monthly reviews – would very quickly bring back into line any differential that might have existed between ‑ ‑ ‑

HAYNE J:   I understand that, but that is no more than saying, is it, that there were successive breaches of contract because there were successive estimates that had to be made; is that right?

MR GILMOUR:   It is true that there were successive breaches, but your Honour asked me the question about why is actual profit relevant when the costs were pre‑estimates.

HAYNE J:   Just bear with me a moment.  There were successive breaches?

MR GILMOUR:   Yes.

HAYNE J:   Because there were successive estimates that had to be made?

MR GILMOUR:   Yes.

HAYNE J:   What does it matter what profit Thiess might in fact have made?

MR GILMOUR:   It runs this way, your Honour:  under the contract Thiess was entitled to receive 5 per cent on its costs.

HAYNE J:   Its costs as genuinely estimated from time to time.

MR GILMOUR:   As genuinely estimated from time to time.  Because the contract was predicated upon a pre‑estimate of costs rather than actual costs, that was why Placer in its approach at trial sought to establish costs by looking at documents which were known as project forecasts.  These were management reports that Thiess prepared which showed that its projected profit based on the rates that it had given to Placer therefore were rates based on estimates.

His Honour found that those project forecasts were unreliable without some adjustment, so he then looked at an alternative method which involved looking at the actual costs.  What his Honour took into account was that the contract provided for the bringing together of the difference between estimated and actual by reference to reviews at a regular pattern across the life of the contract but recognising that at any one time the actual costs might be ahead of or behind the estimates.

All his Honour was doing was doing the best he could.  Because he found on the evidence of Mr Berrey, who was an expert called by Placer and who had reviewed all of Thiess’ ledgers that were relevant to the question, Mr Berrey looked at the question of cost overruns and underruns across the length of the contract.  I can take your Honours to that.

HAYNE J:   Just before you launch into that, I was provoked into the question by what appears at paragraph 176, page 1162 of the appeal book where the Full Court say:

we are of the opinion that the method adopted by his Honour did not adequately take into account the potential for efficiencies and other productivity gains –

What is not apparent to me is what relevance any of that is if the breach is as described by you.

MR GILMOUR:   Because the breaches, your Honour, necessarily resulted in Thiess obtaining more revenue than they were entitled to.

McHUGH J:   That may be so, but it does not seem to me to have much to do with profits.  I would have thought prima facie you were entitled on the difference between the rates that you were charged and the proper rates plus 5 per cent on top of that because they had been used to inflate the profit, and arguably the onus then switched to your opponents to show whether they needed some adjustment.

MR GILMOUR:   That in effect is what happened, your Honour.  The issue of profit is fundamental to the calculation, with respect.  What the trial judge did and what we invited him to do in the way that the case was run was to identify two figures for profit.  One, what was the actual profit which Thiess made; and two, what is the profit that it was entitled to have made had it provided rates based on the internal plant department rates?  The trial judge called the second of these, that is 5 per cent of genuine estimates of costs, allowable profit.  That is plain from the contract.  That was of the order of $3.1 million.  On evidence which is really quite unassailable, his Honour found that the actual profit which Thiess made was $5 million or thereabouts more than that.

HAYNE J:   But that proceeds from the assumption that the game derived by the contract breaker is the equivalent to the loss sustained by the person whose contract has been broken.  That may be so, it may not be so.

MR GILMOUR:   Well, no one pretended then or know, with respect, that it is an absolutely precise method of calculating the loss, but it is a reasonable approach in a contract which provided for 5 per cent on genuine estimates, where there are findings that there are more than double that made actually, against a background of evidence with inflated rates, reckoned in the millions, to isolate that figure of excess profit and to say that, prima facie, that is the measure of damages, that was the result of inflating the rates.  Now, in answer to that, Thiess said, “We were entitled to make more than 5 per cent; for example, we could have made more than 5 per cent because of productivity gains or because of cost underruns.”

CALLINAN J:   Mr Gilmour, what is the provision of the contract, which you say precludes Thiess from getting the benefit of efficiency or productivity gains?

MR GILMOUR:   Your Honour, we have never suggested that Thiess could not have the benefit of cost savings.  We have never suggested that Thiess could not get the benefit of productivity gains within the context of the contract.  The question was, given the nature of the breaches, the inevitable damage, and this figure of about $5 million, which was described by the trial judge as excess profit, how is that to be explained?  Now what Thiess said in its pleading, and the way the case was conducted, in our respectful submission, on the counterclaim, was that firstly it is not excess profit, because we were entitled to inflate the rates.  Now they lost that issue.  Had they won that issue, that figure of $5 million would have been reduced by millions, but they lost that issue.  The next set of explanations they gave were, “In any event we were entitled to make more than 5 per cent because of productivity gains and the cost underruns”

His Honour heard evidence about productivity gains.  He made findings about productivity gains.  He heard evidence about cost underruns and overruns.  He made a finding that across three years there was a cost overrun of, rounded up, $100,000.  He took that into account.  He deducted it from the damages that he awarded to Placer.  He said, “You, Thiess, have not advanced any other explanations for why you earn more than 5 per cent on genuine estimates.  That is the way you conducted the case.”, and on that basis awarded ‑ ‑ ‑

GLEESON CJ:   Was this concept of partnering or partnership ever relied on?  I mean, one would have thought, there must have been a great temptation on some judge somewhere along the line to send this off to a master to take partnership accounts.  Did anybody seek to treat this as, in law, a partnership venture or is that just a fashionable word that was used?

MR GILMOUR:   It is just a phrase that was adopted for this rather different creature than the more usual contract, finding mining contracts which were scheduled rates contracts.

GLEESON CJ:   Well, if it is a straightforward breach of contract case, then presumably what you were claiming back were moneys overpaid.

MR GILMOUR:   Correct, and that is the concurrent findings.  That is why I started at 153 of the Full Court’s reasons.

GLEESON CJ:   Well now, what is the logical connection between the amount by which you were overcharged and the profits made by Thiess?

MR GILMOUR:   Yes, I am attempting to explain that, your Honour.  The premise is really run this way, that we know, and there are findings, that we paid too much.  By paying too much, what that means is that we paid, as apparent compensation for costs, what in fact was, to a considerable extent, disguised profit.  So, to take the trucks, if the rate was, on a genuine estimate, for an operating cost per hour $80, there are concurrent findings that in fact that was inflated by $40. 

What Thiess did was they would bill Placer on the basis of $120.  We would, on the face of it, understand the $120 multiplied by the number of hours by the number of trucks to be the cost to Thiess of using these trucks.  To add insult to injury, we would then add 5 per cent to those figures and that would be their profit.  But actually the $40 out of the $120 for every hour for every truck actually was not cost; it was disguised profit.  So the amount which was overpaid was overpaid as costs, but was in fact profit.  So it became absolutely fundamental to inquire as to what was the actual profit, not what was the pretended profit that Thiess said it had made ‑ ‑ ‑

McHUGH J:   But the use of the term “profit” is totally misleading in this context.  I know clause 3.6.5 uses the term “profit”, but it means no more than a margin – a 5 per cent margin on top of your cost, does it not? 

MR GILMOUR:   Well, that is what profit is, with respect. 

McHUGH J:   It certainly is not.  What about overhead? 

HAYNE J:   I think a few dot coms have worked on that basis, Mr Gilmour. 

MR GILMOUR:   I appreciate your Honour’s comments, but in the context of this contract, overheads were the subject of separate remuneration.  Site costs were ‑ ‑ ‑

McHUGH J:   I appreciate that. 

GLEESON CJ:   But there is the ambiguity that Justice McHugh mentions, is there not, for this reason:  you, in part of your argument, seem to use the word “profit” to mean “excessive charges”, but the true meaning of profit is “the reward for taking risk”.  There might have been different kinds of profit.  What you were basically complaining about is the reward for deception, and it is the attempt to isolate that element that is causing the trouble, is it not? 

MR GILMOUR:   I think, with respect to your Honour Justice McHugh and Justice Hayne, that the issue, “Why call it profit?”, is a false issue.  The question was, “How much money did we pay them that we should not have paid them?”  The process that the trial judge adopted was a way of, in the context of this contract, irrespective of what might be regarded as profit in a different context, but in the context of this contract, what was called “profit” ‑ and it was called “profit” – of 5 per cent on turnover – that is the contractual description ‑ ‑ ‑

McHUGH J:   Well, it was a mark-up for profit.  It did not say it was profit.  It said it was a mark-up for profit.  Look at it this way.  Leaving aside for the moment the question of the 5 per cent, if that was not in the case, your damages would be the difference between what were the proper rates and what you actually paid.  Do you agree with that? 

MR GILMOUR:   Yes. 

McHUGH J:   And on top of that – you would be entitled to recover that, but in this particular contract they charged 5 per cent on top of that.  They charged you an extra 5 per cent, did they not? 

GLEESON CJ:   Or did the 5 per cent go into the rates? 

MR GILMOUR:   No.  They inflated the rates and then they charged 5 per cent for the inflated rates. 

McHUGH J:   They charged 5 per cent.  So to take the illustration you gave, if the proper rates were $80 and they charged $120, they have $40 more than they were entitled to and they have also added 5 per cent on top of that, so they have an extra $2.  So you have been robbed by $42. 

GLEESON CJ:   That is per trip, per haul operation?

MR GILMOUR:   That is per hour, per truck. 

GLEESON CJ:   Per hour, per truck.  All right.  Now, is part of the case that you put that you have only to have demonstrated in the evidence that there were three hours of truck usage of that kind to show that the figure you were awarded by the Full Court is wrong? 

MR GILMOUR:   Yes, your Honour.  On one view that is absolutely right, and there can be no doubt as to that.  In their pleading, Thiess accepted that they had received $2.7 million in a particular period in the contract which constituted the differential between the plant department rates and what they charged us.  At that stage, they were saying we were entitled to charge that, so just in these four lines in their pleading we know that they got at least $2.7 million, and there is evidence of other very considerable amounts.  But in the end the parameters that your Honour used to identify the overpayment did not have regard to other issues which might bear on the question of orthodox profit, namely, costs outside of the site.  His Honour was confined by the terms of the contract which did not provide, and that is the finding, for example, for off‑site costs or for head office costs.  He looked at it only in the context of what was, if you like, profit for the project at this mine, and viewed in that way – although in another context “profit” would be a misleading statement – in the context of this contract, it is to be understood in that way.

GLEESON CJ:   Now, did you just tell us that the evidence clearly showed, and indeed the pleadings admitted, that there were in fact overpayments of some millions of dollars?

MR GILMOUR:   There was one particular pleading that I had referred your Honour to.

GLEESON CJ:   If you could make that proposition good, then you would show that the amount you were awarded by the Full Court was wrong, would you not?

MR GILMOUR:   Yes.

GLEESON CJ:   And that form a reasonable first step in an argument that there should be a retrial?

MR GILMOUR:   Yes, it comes rather late in my submissions, your Honour, because we were hoping to ‑ ‑ ‑

GLEESON CJ:   All right, but just before you complete your submissions it might be worthwhile just making that proposition good?

MR GILMOUR:   Yes, I certainly propose to but in the context of whether it should be back or not.  I think I was at the point of telling your Honours that the most relevantly helpful paragraphs in the Full Court’s reasons are between 30 and 32, at pages 1120 and 1121, dealing with how the reviews worked and how the theory of the contract was to bring the difference between estimated costs and actual costs together.

McHUGH J:   What page is that, Mr Gilmour?

MR GILMOUR:   It is 1120 and 1121.  For example, at clause 30:

The contract . . . covered a multitude of items in respect of which costs  were to be incurred and rates charged.  It also specified the profit to be made and how that profit was to be calculated.

Your Honour Justice McHugh, that is “profit” in the way it is used in the contract.

McHUGH J:   Yes.

MR GILMOUR:   Then 31:

The clauses that provided for rates to be reviewed ‑

the last line –

In our opinion, these provisions give rise to the inference that the contract, as a matter of general policy, was intended to provide a mechanism for payment by Placer of rates that were to be as close as reasonably possible to the actual costs incurred by Thiess.  Changes in circumstances might, however, occur that would lead to a change in the actual costs before a review took place.  Such changes would inevitably affect the overall profit Thiess would make as, for a time, the agreed rates would not coincide with actual costs.

Put it another way, the contract provided for the agreement of rates, from time to time, in advance of work done.

And in the last few lines of paragraph 32:

Accordingly, no matter how circumstances might change, the review system provided a mechanism whereby, within a reasonable time after each such change, Placer would pay Thiess’ actual costs.  This was a reflection of the idea that the risks in the mining operations should be shared.

So, in other words, if the cost proved to be higher than the estimates, the idea was that there would be a review and that glitch, if you like, would be repaired and Thiess would get higher rates.  On the other hand, if costs were coming down, then upon a review, the rates would be reviewed and the rates would come down.  So always seeking to arrive at a position where actual costs, as far as possible, were paid and this contractually described profit of 5 per cent would be added on top of that.

HAYNE J:   Now, carrying on with what the Full Court said at 1122, paragragh 36, their Honours note:

that the contract required Thiess . . . to provide Placer with a genuine estimate of its costs –

and then note that you –

did not allege or rely upon a breach of . . . obligation –

but rather put it under the rubric “of good faith”.

MR GILMOUR:   I am sorry, which paragraph is your Honour dealing with?

HAYNE J:   Paragraph 36, page 1122.  It may explain why this case has taken on every appearance of an attempt by an individual to scratch an itchy left ear by use of the right elbow.  Now, is it right to say that the breach of which you complain was a breach of the obligation of good faith constituted by a failure to provide genuine estimate of costs?

MR GILMOUR:   Yes, that is so, your Honour, or we say, your Honours, that the trial judge had regard to the fact that at one level conceptually in the contract you are dealing with estimated costs, but having regard to the review provisions, the intention was that so far as possible, what would be compensated would be actual costs.  In so far as there was a difference, namely, a cost overrun between the genuine pre-estimates provided by the internal plant department and the costs which were actually incurred by Thiess, his Honour took into account ‑ and this appears at page 924 ‑ the issue of that difference.

GLEESON CJ:   Do you accept what is said in paragraph 153 on page 1155 as the starting point of the calculations?

MR GILMOUR:   Yes, that is where I started my submissions.  That is the difference, to expose the difference, the overpayment, the excess profit, however one describes it.  But at 924, at line 6, dealing with the evidence of Mr Berrey, as I said, called by Placer, it says:

he compared the total operating costs with the total revenue recorded by the plant department.

In compiling this report, he:

took account of all cost overruns and underruns.  The result was that operating costs were $19.344 million, whereas the plant department revenue was $19.250 million for the period of the Granny Smith contract.  According to Mr Berrey, therefore, revenue was $94,000 lower than costs, in a total of $19.250 million over a three year contract.

So what his Honour looked at, given that he had been looking at actual profit made and having regard to the contract dealing in the first instance with estimated costs, was to say, “Well, was there any substantial difference?”  The Full Court said that it was always the intent of the contract to bring the two together and here we have the substantive evidence for that, namely, that across the period of the contract the difference between the genuine estimates from the plant department and the actual costs of running that equipment was 94,000.

Mr Kenny, later in that page, who was the manager of Thiess’ internal plant department said that the difference was “only $58,000”.  He rather prided himself on the fact that the internal plant department did not make a profit or a loss.  But, in any event, the trial judge rounded up the $94,000 found by Mr Berrey and he gave credit for that $100,000 to Thiess and thereby reduced the damages.  That approach catered for any lingering doubts as to the difference between estimated costs, on the one hand, and actual costs on the other, in our respectful submission.

HAYNE J:   I am not sure I understand that at all, Mr Gilmour.  Is the finding at page 924 a finding that the costs estimated by Thiess and put forward to your client as costs be called actuals?

MR GILMOUR:   As I said earlier, your Honour, the costs of the plant department were the costs, if you like, invoiced to Thiess.  Thiess was the client of the internal plant department.  The internal plant department billed Thiess for the costs of operating the plant and equipment, in effect, hired by the plant department to Thiess at the plant department’s rates.  That is in the first two lines starting:

However, in Mr Berrey’s report . . . the total revenue recorded by the plant department.

That is the revenue which the internal plant department received from its client, Thiess.  On the other hand, Thiess, in actually operating that equipment, incurred operating costs of $94,000 more than it was required to pay to the internal plant department.

HAYNE J:   What is the relationship between the costs recorded by or estimated by the plant department and the costs used as the basis for charge to your client?

MR GILMOUR:   The finding was that the internal plant department rates charged to Thiess should have been the basis for deriving the rates relating ‑ ‑ ‑

HAYNE J:   Yes, but were they?

MR GILMOUR:   They were not.  What was used were those rates inflated, which obviously visited the substantial amounts of money in overpayments.  But what his Honour did was to take into account the fact that in the actual operation of the equipment across the life of the contract, he ought to give credit to Thiess for the fact that actually the operating costs of the equipment were higher for it than it had paid to the plant department.  That is how he viewed it.

HAYNE J:   Leaving aside what one does with this $94,000 difference, if the Full Court is right at page 1155, paragraph 153, why is the damages to be assessed otherwise than as the difference between plant department rates and rates in fact charged out?

MR GILMOUR:   That is what his Honour did seek to do; that is the approach he took.  That is the very approach that we invited him to take and that is in principle the approach which his Honour took.  He calculated a figure of 5 per cent on those plant department rates, to which your Honour has referred.  That is what Thiess under the contract was entitled to.  He then looked at the actual revenue which Thiess had received and isolated how much of that revenue was extra to, one, the costs identified by the internal plant department; two, the 5 per cent on the rates identified by the plant department and charged to Thiess at site, and came to the conclusion, given the very serious findings of breach of the kind that they were, that the difference, that extra revenue, on its face was the measure of our damages.

That was the extra amount which, but for the addition to the rates, Thiess would not have received unless of course there were some other explanations which found their source in the contract and which entitled Thiess to have earned more than 5 per cent on the internal plant department costs genuinely.  That is the point at which one considers issues such as productivity gains or losses and cost overruns or underruns.

CALLINAN J:   Mr Gilmour, I do not quite understand the basis upon which productivity gains can be made.  Is this the basis, that so long as the estimate was a genuine estimate, if the respondent could beat the genuine estimate, then it was entitled to the benefit of that until the time of the next review when the true cost was calculated?  Is that correct or not?

MR GILMOUR:   I wonder if I could answer that question by taking your Honour to the contract.  If your Honours go to volume 3, page 532.

CALLINAN J:   Page 532?

MR GILMOUR:   If you started at 2.1.6 which deals with:

The shovel/truck productivities and resulting base rates per BCM shall be eligible for review in the following two areas ‑

and provides for monthly variations and a quarterly review.  The “shovel/truck productivities”, that relates to what is otherwise known as “excavate, load and haul”, that is the process of digging material out and trucking it out to wherever.  Clause 2.1.8 provides that:

The calculated shovel/truck productivities and resulting base rates . . . shall not be subject to upward revision as a result of decreased actual productivity unless said decrease is greater than 7.5% of the calculated productivity measures on a shift basis averaged over one month and is due to . . . ground conditions which could not reasonably have been foreseen . . . slow digging –

and the like.  So, in other words, even were there a decrease in actual productivity by Thiess across a month, unless the decrease was more than 7.5 per cent of the calculated productivity there would be no change.

CALLINAN J:   On two conditions:  it had to be 7.5 and it had to be as a result of unforeseen conditions or variations, is that right?

MR GILMOUR:   Quite so, but one sees that 2.1.8 deals with a reduction in actual productivity as against the calculated productivity but Thiess would not get the benefit of a revised upward rate, to take account of that across that one, unless the decrease was more than 7.5 per cent.  Conversely, dealing with an increase in productivity, that is dealt with at 2.1.9, the principle is the same.  Unless the increase in productivity is more “than 7.5 per cent on a shift basis averaged over one month”, then Placer could not for that month call for the rates referable to excavate, load and haul to be reduced.  So, in that way, at a monthly interval, one can see that there was a basis based in productivity expressly provided for in the contract for Thiess to either have suffered as against rates based on estimated costs.  A recovery of less costs or less profit at the end of the day because they were less productive but they could not do anything about it because it was not greater than 7.5 per cent ‑ ‑ ‑

CALLINAN J:   They could have a productivity gain up to 7.5 per cent, is that right, and that is one of the productivity gains?

MR GILMOUR:   They could have had a productivity decrease of less than 7.5 per cent and there was nothing they could do about it, they just had to wear that.

CALLINAN J:   And nothing your client could do about it if they were ‑ ‑ ‑

MR GILMOUR:   And if there was an increase but it was less than 7.5 per cent there was nothing Placer could do about it, that is, on a monthly basis.

GLEESON CJ:   How, if at all, did weather affect productivity issues or other risks associated with this contract?

MR GILMOUR:   That does not appear to be provided for in the contract.

GLEESON CJ:   So, if there a prolonged period of wet weather making hauling operations more difficult or expensive, who carried the risk of that and who got the benefit from a prolonged spell of dry weather?

MR GILMOUR:   That would be dealt with under the quarterly review provision which is on page 533 which provided for mandatory quarterly reviews of actual and calculated shovel/truck productivity commencing in January 1993.  The only provision was that any adjustments that were made would not be applied retrospectively.  That is 2.1.11.  So, to take your Honour the Chief Justice’s factual proposition, if that were to occur and across a three‑month period, Thiess were to have suffered a blow out in costs as against the estimates, could bring that to the table and if seemed likely that that was going to continue into the future then the parties would agree a reviewed rate of the base rates applied to excavate, load and haul and would pay rates at a higher amount than they had before.

In the context of this case, your Honour, if that had happened, then, in our submission, it was for Thiess to have asserted that such was the case, that it either suffered losses, which is what would happen in that case, or made gains.  It would not advance its case to say it had suffered losses.

GLEESON CJ:   Now, was another factor that might affect the profitability of this operation the compactness of the material that was being mined?  Were these costs estimated on assumptions as to how easy or difficult it would be to drill and blast and might those assumptions be found to be wrong?

MR GILMOUR:   Your Honour, without going into the very detailed evidence on, for example, drill and blast, drill and blast, the rates referable to that were calculated against the mine plan.  Now, the mine plan had regard to geological data as to the ground conditions, the kind of material, the amount of rock that was expected to be found.  The blast patterns differed accordingly depending upon that data and therefore the length of time that a drill would be required would differ from one part of the pit to another.  That is not expressly catered for, albeit broadly, in the monthly – sorry, that is in relation to shovel/truck productivity, but in relation to drill and blast there were also three‑monthly reviews.

But again, your Honour, it is not relevant to consider whether Thiess was making less than it should have been, because the question here was, “Why did Thiess earn more than it should have been paid?”  The way it pleaded its case, the way it ran its case, was to say, leaving aside the differential and that being its primary argument, “That we were entitled to earn more than 5 per cent because of productivity, because of cost efficiencies and the like”, not the other way, not making losses.

CALLINAN J:   Mr Gilmour, are all the other possibilities for productivity gains all to be calculated in a similar way to the means provided by those clauses that you referred us to?

MR GILMOUR:   Your Honour, the section C, which is the compensation section of the contract, which I took you to, starting at 530, deals with the reviews of the various base rates.  I have shown you 2.1.8 and 2.1.9 and 2.1.10, where it deals with variations to the excavate, load and haul rate.  At page 534 at clause 2.2.5 one finds the provision for quarterly reviews of what were known as “simulation parameters”.  The simulation parameters were those inputs in relation to the excavate, load and haul aspect of the mining which were provided by the internal plant department.  They were matters such as depreciation, the cost of major repairs, cost of fuel ‑ ‑ ‑

CALLINAN J:   I understand that.  What I am interested in though was a similar type of formula to apply to other possible productivity gains as the ones that you have shown us in paragraph 2 ‑ ‑ ‑

MR GILMOUR:   I am sorry, I misunderstood your Honour’s question.  There is no other provision in the contract that expressly deals with productivity gains.  There are express provisions for quarterly reviews of other base rates under the contract, but not specifically productivity gains.  That is only referable to excavate, load and haul.

CALLINAN J:   Well, how would productivity gains be derived in other instances, that is, other than the shovel and truck?

MR GILMOUR:   If you take the drill and blast component of the work, the ground conditions might be less difficult, less pick out the rock ‑ ‑ ‑

GLEESON CJ:   You might be able to use less explosive.

MR GILMOUR:   Softer.  Use less explosives, drill faster because the ground conditions are different.

CALLINAN J:   Then Thiess would get the benefit of that until the next review, is that right?

MR GILMOUR:   Yes, because they are not retrospective.  This goes to the evidentiary burden point, amongst others.  We say if such was the case that they made gains then they should have pleaded that and they should have established it.

GLEESON CJ:   If you at the top of page 1159 in the concluding sentence in paragraph 164, rightly or wrongly, the Full Court, as I understand it, thought they there put their finger on the fallacy involved in the trial judge’s methodology.

MR GILMOUR:   That is the first three lines on that page?

GLEESON CJ:   Yes.  They say he made a certain “assumption” and, by inference, an erroneous assumption:  (a), did he make that assumption and, (b), if he did, was the assumption wrong?

MR GILMOUR:   Yes, he did, your Honour.  He did assume.  We say although he did not use the words, he did so on the basis that those were the explanations advanced by Thiess on top of the differential rates that are given for suggesting that it had gained more than the 5 per cent provided for under the contract.  He said, as I took your Honours to earlier, that no other source of additional profit, as that seized in the contract, was suggested by Thiess.

So, we say it is correct that that was the approach of the trial judge and that, we say, was the correct approach.  That once we had isolated what was prima facie our damage, our damages being this excess revenue or excess profit, that that demanded an explanation.  We know that a very large amount of that came from the differential to the plant department rates of what we were charges.  As to the balance, Thiess pleaded that it had made productivity gains during part of 1993.  It pleaded, albeit in a general sense, that it was entitled to the benefit of any cost underruns.  That is a cost efficiency.

That was information which it had if Thiess had made productivity gains then it was for it to bring that forward.  If had the benefit of cost underruns, it was for Thiess to bring that forward.  The reason, in our respectful submission, that the Full Court erred is really summed up at 202, although it is referred to in a number of other paragraphs.  It is what it describes as this failed fallacy, namely, that it says at 1172:

The burden was on Placer to prove such profits.

In other words, it was for Placer to have….explained by the Full Court, to have identified just where it was that Thiess made profits on productivity and cost underruns, bearing in mind that it was Thiess that ran the contract, it did the mining.  If it be productivity gains, it knew about those.  It knew about any cost efficiencies it might have made.  The Full Court fairly and squarely laid that burden on Placer to expose those, to somehow work out what productivities there were, what cost underruns there were, plead them and prove them.

GLEESON CJ:   If this matter went back for a new trial, would you be able to do the assessment set out in paragraph 165?

MR GILMOUR:   Your Honour, I do not know that that is now possible.

GLEESON CJ:   Why would it not be possible?

MR GILMOUR:   Just because it is so long since the – I am not instructed as to whether the huge volume of documents referable to the contract are now available to rerun a plant specific.  That is why we abandoned that ground of appeal, your Honour, because originally we had put that as the very last resort in terms of the orders that we would ask this Court to make.

CALLINAN J:   It is referred to in Gould v Vaggelas 157 CLR at 220 too, with approval, I think.

MR JACKSON:   Thank you, your Honour? Your Honours, perhaps I should mention I was going to refer to two other cases on this point.  One is the other decision in this Court, that is Luna Park 61 CLR 286 at 300, 301, 307, 311 and 312, and a decision of the New South Wales Court of Appeal, Scott v Echegaray (1991) Aust Torts Reports 81 - 120.

KIRBY J:   We had a case last week.  The case was concerning claims for damages for child sexual abuse in schools.  In one of those Justice Heydon, at the end of his reasons, came to the conclusion that the way the matter had been dealt with was so unsatisfactory it was one of those unusual cases where a new trial was the only solution.  It may be that that line of territory has to be considered as well, I do not know.

GLEESON CJ:   There is a decision of the Court of Appeal I notice listed here, Troulis v Vamvoukakis.  That was a case in which a failure by a plaintiff to lay the evidentiary foundation for a calculation of damages in an action of deceit, as I recollect it, produced the result that there were no damages awarded.

MR JACKSON:   Yes.  Your Honour, I am not certain if that case is one of the one’s referred to in the decision of the Full Federal Court to which I adverted.

CALLINAN J:   Mr Jackson, I just see that the Chief Justice ‑ I know that he dissented in Ted Brown, but at page 26, about line 43:

This, in my opinion, is not a case in which there was no material whatever on which an informed assessment of the loss could not be made.

MR JACKSON:   Your Honour, could I just say in relation to that, one takes the sentence as a whole, as it were.  The assessment has to be formed.  Now, in relation to contract, nominal damages really exist in, broadly speaking, two circumstances:  one is where there is a breach, nominal damages follow; but the other is where there is a breach but it has not been possible to establish what the damages are, although one can see that some damage is likely to have been sustained.

CALLINAN J:   This Court has recently said that looking at these questions, care should be taken to look at the capacity of respective parties to adduce the evidence.  You might tomorrow deal with that so far as your client’s ability to produce evidence of productivity gains, even if by way of sample only.  I think that may be something you can deal with tomorrow.

MR JACKSON:   We would not contest it that we could do it.  It would be silly to suggest otherwise.  Equally, however, that gives rise to two issues, two aspects of the case.  One is whether the material that we had was equally available to the plaintiff or sufficient of it was equally available.  The other is whether, in the circumstances of the case, it was necessary for us to do so.

CALLINAN J:   Except you do have a finding against you.  You made the submission at one stage, I think, that in deciding whether to enter into the contract Placer was in as good a position as you, and there seems to have been a finding to the effect that you were the experts in this area.  That was on the issue of liability, but it may have some relevance to the issue of damages.  You were undoubtedly in a better position than the appellant to prove productivity.  Whether that means you should lose or not is another question, but you are indisputably in a much better position, I would have thought.

MR JACKSON:   Yes.  That finding your Honour is referring to has to be borne in mind.  There was one made in circumstances where our figures were gone through with, as it were, the fine-toothed comb and, that having been done, we were then squeezed a little more, as it were, and the result

was that we were dealing with a party which was deciding whether to mine itself, as it did in other places, or to continue with us.

GLEESON CJ:   When you say you could do it yourselves, do you mean you could do the calculation referred to in paragraph 165?

MR JACKSON:   No, your Honour, but no doubt we could.

GLEESON CJ:   We will adjourn until 10.15.

AT 4.23 PM THE MATTER WAS ADJOURNED
UNTIL WEDNESDAY, 11 SEPTEMBER 2002