Ross Ambrose Group Pty Ltd v Renkon Pty Ltd (No 3 - Quantum)

[2010] TASSC 37

[2010] TASSC 37

COURT:  SUPREME COURT OF TASMANIA

CITATION:              Ross Ambrose Group Pty Ltd v Renkon Pty Ltd (No 3 – Quantum)      [2010] TASSC 37

PARTIES:  ROSS AMBROSE GROUP PTY LTD (ACN 009 501 759)

v
RENKON PTY LTD (ACN 009 581 622)
REES, Suzanne
SHIPTON, Peter John
PLUNKETT, Rodney
PLUNKETT, Susan Elaine

DOOLAN, Bruce Richard
ELLIS, Timothy James
WELCH, Phillip Andrew
SMITH, David Anthony

FILE NO/S:  422/1992
DELIVERED ON:  11 August 2010
DELIVERED AT:  Hobart
HEARING DATE:  27, 28 April, 2, 18 June 2010
JUDGMENT OF:  Tennent J
CATCHWORDS:

Damages – Measure and remoteness of damages in actions for tort – Measure of damages – In general – Assessment of damages by reference to events which might have occurred but did not.

Ross Ambrose Group Pty Ltd v Renkon Pty Ltd [1998] TASSC 72; State of Tasmania v Wilson [2000] TASSC 152; Malec v J C Hutton Pty Ltd (1990) 169 CLR 638; Sellars v Adelaide Petroleum Pty Ltd (1992 - 1994) 179 CLR 332; Wilson v State of Tasmania [1999] TASSC 145; Hungerfords v Walker (1989) 171 CLR 125, referred to.
Aust Dig Damages [28]

REPRESENTATION:

Counsel:
             First to Fifth named
             Defendants:  S Tatarka
             Fifth Party:  K B Procter SC
Solicitors:
             First to Fifth named
             Defendants:  Page Seager
             Fifth Party:  Murdoch Clarke

Judgment Number:  [2010] TASSC 37
Number of paragraphs:  57

Serial No 37/2010
File No 422/1992

ROSS AMBROSE GROUP PTY LTD (ACN 009 501 759) v RENKON PTY LTD (ACN 009 581 622), SUZANNE REES, PETER JOHN SHIPTON,
RODNEY PLUNKETT, SUSAN ELAINE PLUNKETT, BRUCE RICHARD DOOLAN, TIMOTHY JAMES ELLIS, PHILLIP ANDREW WELCH, DAVID ANTHONY SMITH (NO 3 – QUANTUM)

REASONS FOR JUDGMENT  TENNENT J

11 AUGUST 2010

1. For the purpose of these reasons, Renkon Pty Ltd, Suzanne Rees, Peter John Shipton, Rodney Plunkett and Susan Elaine Plunkett will together be described as "the plaintiffs", and Bruce Richard Doolan, Timothy James Ellis, Phillip Andrew Welch and David Anthony Smith will together be described as "the defendants".

1. On 18 September 2009, I published reasons determining liability as between Renkon Pty Ltd and the defendants in what were effectively third party proceedings between them. I found for Renkon Pty Ltd. The trial continued in relation to quantum in April this year, with a final argument about particulars being completed in June. These are my reasons in relation to the issue of quantum. For the purpose of these reasons, while I do not repeat them, I will otherwise use the same definitions which appear in par[4] of the 2009 decision.

Some background facts

1. Renkon settled its purchase of the Olde Tudor Motor Inn from Ambrose on 30 June 1989. Its lease of the premises from which the business operated commenced on 1 July 1989. The initial term was for four years with options to renew. There was a covenant on the title to the leased property which could have prevented Renkon from operating its business. The parties entered into an agreement to deal with the covenant post settlement, that is the Covenant Agreement.

1. The Covenant Agreement was not a complicated document. Put simply, had the covenant not been removed by 30 June 1991, or had there been an attempt to enforce the covenant, Ambrose was required to accept a surrender of the lease and pay to Renkon (not the plaintiffs) the sum of $1,000,000 subject to certain adjustments (in effect pay back the purchase price for the business). The covenant was not removed by 30 June 1991, and indeed it was not removed until October 1992. However, had Renkon sought it in or about July 1991, Ambrose would have been obliged to accept the surrender of the lease and pay the stipulated amount to Renkon. When specific performance of the Covenant Agreement was eventually sought (after notice seeking the surrender was given in September 1992 and rejected), Renkon failed. In Ross Ambrose Group Pty Ltd v Renkon Pty Ltd [1998] TASSC 72, Wright J determined that there was an implied term in the Covenant Agreement that notice seeking the surrender be given within a reasonable time after the entitlement to give it arose, and that such a reasonable time would be about three months. Since the notice had been given 15 months after the entitlement to do so arose, Renkon was effectively too late.

1. The lease was not renewed at the end of June 1993 and receivers were brought in in respect of the business.  The plaintiffs lost the business and became involved in legal proceedings with Ambrose, in which they were unsuccessful. As a consequence, there were judgments entered and costs orders made against Renkon.

The dispute in these proceedings

1. The plaintiffs' case is that, had Mr Doolan told them in or about May 1991 that, come July 1991, absent the removal of the covenant, Renkon could give notice of surrender in respect of the lease, they would have done so. Had they done so, they would have incurred none of the particularised losses. This Court, in those circumstances, should put them back in the position in which they would have been back in 1991 after the right to surrender had been successfully exercised. Counsel for the defendants says that this Court cannot be satisfied on the evidence that the plaintiffs, even had Mr Doolan told them of a potential entitlement to seek a surrender of the lease, would have sought a surrender in July 1991 or even within the time frame Wright J considered reasonable. Had they not sought a surrender within the identified time frame, events could have unfolded largely as they eventually did, and it is likely the damage complained of would, in large part, have been suffered anyway. Hence, the damage complained of was not as a consequence of the defendants' failure to properly advise.

Particulars of damage claimed

1. At the commencement of the resumed hearing, counsel for the plaintiffs provided to the Court amended particulars of damage dated 26 April 2010. There were five categories of damages claimed.

1. Category 1 is in the amount of $820,505 and represents the amount which Renkon might have recovered from Ambrose and Deming under the Covenant Agreement had it exercised its rights under that agreement in a timely fashion.

1. Category 2 is in the amount of $1,219,457, an amount calculated up to and including 26 April 2010. It represents interest calculated on the $820,505 for the period 30 September 1992 to 26 April 2010 based on Hungerfords v Walker principles. A daily rate of interest of $354.61 thereafter is also claimed. The defendants do not dispute the calculations.

1. Category 3 is in the amount of $92,188.92, again a figure calculated up to and including 26 April 2010. In November 1992, Ambrose sued Renkon for arrears of rent. The arrears initially arose when Renkon held back amounts from rent once notice seeking the surrender was delivered. The remainder of the plaintiffs were joined to the proceedings as guarantors of Renkon's obligations. Renkon counterclaimed against Ambrose, seeking specific performance of the Covenant Agreement. It failed. It failed on the counterclaim principally on the basis that it had not sought to exercise its rights under the relevant agreement in a timely fashion. On 17 March 1999, a judgment was entered which required Renkon to pay costs to Ambrose referable to the failed counterclaim. The taxation of those costs was ultimately completed in 2001, and resulted in certificates of taxation totalling $58,000. An amount paid by way of security for costs plus accrued interest was paid out of court in reduction of the amount owed. Renkon has claimed interest on that part of the costs which are unpaid, that is $43,756.95, for the period 17 March 1999 to 26 April 2010 in the amount of $34,188.92. The total of the taxed costs and interest is the amount claimed. A daily rate of interest thereafter is claimed at $10.85.

1. Category 4 is in the amount of $542,390.67, again a figure calculated up to and including 26 April 2010. On 18 February 2002, judgment was entered against Renkon in favour of Ambrose in the sum of $304,485.15. The judgment arose from the proceedings commenced by Ambrose in 1992 to recover rent. Renkon claims the judgment sum and interest from 18 February 2002 to 26 April 2010. The interest amounts to $237,905.52, which, when added to the judgment debt, results in the total claimed. There is also a claim for a daily rate of interest thereafter of $74.50.

1. Category 5 is in the amount of $60,565.46, calculated up to and including 26 April 2010. At the time the judgment referred to in relation to category 4 was entered on 18 February 2002, an order was also made requiring Renkon to pay Ambrose's costs. They have never been taxed, but are estimated to be $34,000. The claim includes interest of $26,565.46 on that estimated sum.  Interest is also claimed at a daily rate after 26 April 2010 at the rate of $8.43.

1. The total damages sought up to and including 26 April 2010 is $2,735,107.05.

The law

1. The starting point identified by counsel for the plaintiffs in the Court's consideration of Renkon's claim was that outlined by Cox CJ in State of Tasmania v Wilson [2000] TASSC 152, where at par[2], his Honour said:

" … The well-established principle in respect of the recovery of damages was reiterated in Haines v Bendall [1991] HCA 15; (1991) 172 CLR 60 at 63, where Mason CJ, Dawson, Toohey and Gaudron JJ said:

'The settled principle governing the assessment of compensatory damages, whether in actions of tort or contract, is that the injured party should receive compensation in a sum which, so far as money can do, will put that party in the same position as he or she would have been in if the contract had been performed or the tort had not been committed: Butler v Egg and Egg Pulp Marketing Board [1966] HCA 38; (1966) 114 CLR 185, at p 191; Todorovic v Waller [1981] HCA 72; (1981) 150 CLR 402, at p 412; Redding v Lee [1983] HCA 16; (1983) 151 CLR 117, at p 133; Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351, at pp 355, 386; MBP (SA) Pty Ltd v Gogic [1991] HCA 3; (1991) 65 ALJR 203; 98 ALR 193; Livingstone v Rawyards Coal Company (1880) 5 App Cas 25, at p 39; British Transport Commission v Gourley [1955] UKHL 4; (1956) AC 185, at pp 197, 212. Compensation is the cardinal concept. It is the 'one principle that is absolutely firm, and which must control all else': Skelton v Collins [1966] HCA 14; (1966) 115 CLR 94, per Windeyer J at p 128. Cognate with this concept is the rule, described by Lord Reid in Parry v Cleaver [1969] UKHL 2; (1970) AC 1, at p 13, as universal, that a plaintiff cannot recover more than he or she has lost.'"

1. Counsel for the plaintiffs also identified how this Court should assess damages by reference to events in the future which did not occur. He referred to Malec v J C Hutton Pty Ltd (1990) 169 CLR 638, where Deane, Gaudron and McHugh JJ said, at 642, under the heading "Assessing Damages for Future or Potential Events":

"When liability has been established and a common law court has to assess damages, its approach to events that allegedly would have occurred, but cannot now occur, or that allegedly might occur, is different from its approach to events which allegedly have occurred. A common law court determines on the balance of probabilities whether an event has occurred. If the probability of the event having occurred is greater than it not having occurred, the occurrence of the event is treated as certain; if the probability of it having occurred is less than it not having occurred, it is treated as not having occurred. Hence, in respect of events which have or have not occurred, damages are assessed on an all or nothing approach. But in the case of an event which it is alleged would or would not have occurred, or might or might not yet occur, the approach of the court is different. The future may be predicted and the hypothetical may be conjectured. But questions as to the future or hypothetical effect of physical injury or degeneration are not commonly susceptible of scientific demonstration or proof. If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the degree of probability of those events occurring. The probability may be very high - 99.9 per cent - or very low - 0.1 per cent. But unless the chance is so low as to be regarded as speculative - say less than 1 per cent - or so high as to be practically certain - say over 99 per cent - the court will take that chance into account in assessing the damages. Where proof is necessarily unattainable, it would be unfair to treat as certain a prediction which has a 51 per cent probability of occurring, but to ignore altogether a prediction which has a 49 per cent probability of occurring. Thus, the court assesses the degree of probability that an event would have occurred, or might occur, and adjusts its award of damages to reflect the degree of probability. The adjustment may increase or decrease the amount of damages otherwise to be awarded. See Mallett v. McMonagle (1970) AC 166, at p 174; Davies v. Taylor (1974) AC 207, at pp 212, 219; McIntosh v. Williams (1979) 2 NSWLR 543, at pp 550-551. The approach is the same whether it is alleged that the event would have occurred before or might occur after the assessment of damages takes place."

1. Malec was a case involving personal injuries. In the High Court in Sellars v Adelaide Petroleum Pty Ltd (1992 - 1994) 179 CLR 332 at 350, in a joint judgment of Mason CJ, Dawson, Toohey and Gaudron JJ, their Honours quoted part of the passage which is extracted in the preceding paragraph, and then went on to say:

"Neither in logic nor in the nature of things is there any reason for confining the approach taken in Malec concerning the proof of future possibilities and past hypothetical situations to the assessment of damages for personal injuries. The reasons which commended the adoption of that approach in assessments of that kind apply with equal force to the assessment of damages for loss of a commercial opportunity, as the judgments in Amann acknowledge."

1. In State of Tasmania v Wilson (supra), which was a personal injuries matter, the court made reference to the principles in Malec's case. At par[44], Slicer J referred to the primary findings of the trial judge on which the assessment of future economic loss was made. He quoted a passage from the judgment at first instance which was as follows:

"I am satisfied that the plaintiff has not returned to work as a consequence of the anxiety state from which he suffers and for which the overdose incident is a contributing cause. I have, however, formed the view that regardless of whether the overdose incident had occurred, it is unlikely that the plaintiff would have returned to his former employment following his hospitalisation. In reaching this conclusion, I should say that I consider it to be significant that prior to the plaintiff's hospitalisation he was concerned about the stress of his work and was offering himself for a redundancy. I also consider it likely that the symptoms the plaintiff would have suffered from following his hospitalisation, regardless of the overdose incident, would have been sufficient to have enabled him to obtain an invalidity benefit. Having obtained that benefit, it is unlikely that the plaintiff would have sought alternative employment as it would have exposed him to the risk of having his pension suspended or reduced. If my views about this are correct, the plaintiff has suffered no loss of income by reason of the overdose incident. It is, of course, not certain that my prognostications are correct. They relate to hypothetical events which may or may not have occurred, regardless of the overdose incident. It is, of course, possible that the plaintiff would have returned to his former work had the overdose incident not occurred. This is a real possibility which cannot be dismissed as mere speculation. The plaintiff is entitled to compensation for the loss of this possibility. My assessment of this loss is an evaluation which defies precise calculation and it is undesirable that I seek to assess it on the footing of an evaluation expressed as a percentage; Malec v J C Hutton Pty Ltd[1990] HCA 20; (1990) 169 CLR 638 at 639 - 640 and 642 - 643."

The Full Court found no error in the approach adopted.

Renkon's claim

1. Counsel for the plaintiffs articulated the approach which should be taken in this case in the following terms, namely, that the plaintiffs had a chose in action in the form of a right to seek back monies under the purchase agreement, which right was lost because they did not receive appropriate advice. The right then became barred by the passage of time. Counsel submitted that the correct question was not, what were the chances of Renkon exercising the right had it received appropriate advice in May 1991 (as articulated by counsel for the defendants) but, what were the chances of Renkon recovering the amount claimed from Ambrose when the right was exercised.

1. With respect, I disagree. Renkon's claim is predicated upon the proposition that, had Mr Doolan given Ms Rees advice alerting her to the existence of the right to surrender in May 1991 and its implications, Renkon would have exercised its rights under the Covenant Agreement within a reasonable time after 1 July 1991 and not suffered any of the losses particularised.  The event, which it is said would have happened but did not, is that Renkon would have given notice to Ambrose that it sought a surrender of its lease in the first few months of the 1991/1992 financial year. The approach articulated by counsel for the plaintiffs presupposes a finding that such a notice would have been given in that time-frame, and that the only uncertainty was recovery of the amount to be paid under the Covenant Agreement.

1. This is not a case where a right to sue which would inevitably have been exercised has been lost as a consequence of the negligence of a third party. This is a case where Renkon acquired, at a particular date, an entitlement to exercise a particular right, if it chose to do so. It was not inevitable that it would exercise the right, either within a reasonable time or indeed at all.

1. As indicated in par[4], Wright J determined that a reasonable time was about three months. I see no reason to disagree with that view and neither counsel urged me to do so. The entitlement to seek a surrender accrued on 1 July 1991, and the window of opportunity therefore extended between that date and about the end of September 1991. Had Renkon chosen to exercise the right to seek a surrender in that period, Ambrose would have been obliged to pay Renkon the sum of $820,505. However, even had the plaintiffs been alerted to the existence of the right in May 1991, they may have chosen not to exercise it at all or to do so outside the time-frame which might have been considered reasonable. The likely consequence is that the capacity to exercise it would then have been lost. There would, in the latter case, have been no causal link between the claimed loss and any action or inaction of the defendants.

1. The issue to be determined must be, what is the degree of probability that Renkon would have sought a surrender of the lease in or about July to September 1991 had it been alerted to its rights under the Covenant Agreement in or about May 1991 to do so? We know none of this happened. Therefore, the Court can only have regard to the events which did occur, and determine, if possible, the probability of events having occurred in a different way.

1. Counsel for the plaintiffs submitted that it was 100 percent certain that, had the plaintiffs been alerted to the existence of the right to seek a surrender, that right would have been exercised within the appropriate time. Counsel for the defendants submitted it was highly improbable that would have occurred.

1. Ms Rees gave evidence about some matters affecting the operation of the business in the first half of 1991. I summarised some of her evidence at pars[14] and [15] of my earlier reasons in the following terms:

"14Ms Rees described the business as performing very well. She knew that, over the time she had worked in the business, there had had to be a number of repairs to the buildings, but she thought that they had all been attended to prior to the purchase. However, when describing the period when she said she dealt with Mr Doolan in 1991, she said that she was having structural problems with the buildings. She described the place as 'falling down around my ears'. She said:

'I had problems with the tarmac, I continually had to fill potholes and they were very big potholes outside the bottle shop. I had structural damage that there were no footings. I had an order put on me from the Licensing Board where there were a lot of orders that had to be taken care of.'

She went on to say:

'In the motel section, and they – from one to twenty eight, there was structural damage there, in one, out two and three bedroom section. There were definitely no footings there. I had baths collapsing, I even had a person that was actually standing in the bath because the shower was over the top and it collapsed while the gentleman was in it ... It collapsed off the wall, the bath.'

15The orders, to which Ms Rees referred, were two notices, both dated 13 May1991, from the Commissioner for Licensing, addressed to her as the licensee of the Olde Tudor Motor Inn. They required her to undertake certain work on the premises. The first notice contained five pages. The work was identified by reference to where it was required namely, in the accommodation, in particular bars or in the convention area. There were 39 requirements in the accommodation area. In 15 rooms, Ms Rees was required to replace the mattresses and the bath. In another 21 rooms, mattresses had to be replaced. The requirements in the bars and convention area related to the replacement of carpet, the sanding back and refinishing of timber sections of bars, and the replacement of bar servery surfaces. None of the requisitions appeared to relate to any major structural repairs, a fact which Ms Rees confirmed."

1. Ms Rees also gave evidence that, over time, she had been having discussions with Mr Ross Ambrose about the issue of rent, and whether Ambrose would pay for some of the repairs. While her evidence was also to the effect that she asked Mr Doolan if there was a way she could get out of the lease when she spoke to him in May 1991, my conclusion, which appears at the end of par[37] in my earlier reasons, was that she did not. I concluded that what she asked him was whether there was a way that she could avoid having to comply with the Licensing Commission orders. It follows from that, that Ms Rees, and I infer the plaintiffs generally, had no thought of walking away from the business at that particular time.

1. Counsel for the defendants referred to the findings made in September 2009 as to the plaintiffs' position when they bought the business. These flowed from the evidence of Ms Rees, who was the only director of Renkon to give evidence. I found in my earlier reasons that:

"The purchasers made a decision to buy the business. It is clear from the evidence of Ms Rees that the purchasers thought the business had great potential and that the purchase was a very good one for them to be involved in. She acknowledged that she had a good knowledge of the business at that time."

1. There was also of course the detailed memorandum of advice supplied by Mr Doolan to the plaintiffs prior to settlement. A copy is set out in my earlier reasons, and I do not repeat it in its entirety here. In summary, it highlighted the fact that the lease proposed to be entered into was a very onerous one from the plaintiffs' point of view. The rent was high. The advice relating to repairs was in par8 and was in the following terms:

"8The Lease remains an all repairing Lease still requiring you to carry out all statutory requirements structural or otherwise. Whilst the property is fairly free of maintenance, this is still an unusual lease and you are undertaking responsibilities not usually undertaken. The Lease allows you to recover nothing of any monies spent on structural additions required during term of Lease and may require you to spend large sums in the last year of your lease. There is no suspension of the rent in the case of fire. You are required to insure against loss of profits in the latter event."

The plaintiffs nevertheless settled and the lease was executed.

1. As at June 1991, the lease still had another two years to run and the business continued to trade profitably. According to Mr Ambrose when he gave evidence, as at the middle of 1991, he was keen to retain Renkon as a tenant. He described the lease as standard. It may have been so from his perspective as a landlord obtaining significant potential benefits. From the point of view of an equal playing field between a landlord and tenant, I would accept Mr Doolan's view that it was an onerous lease.

1. There was little, if any, evidence about what happened with the business between June 1991 and September 1992. Ms Rees did agree that in September 1992, the business was trading well and making a profit, although the situation with repairs was ongoing. The directors of Renkon held a meeting in September 1992 and, at that point, discussed a valuation they had recently obtained which indicated they were paying far more than what might then have been considered a fair market rent. That meeting was attended by Mr and Mrs Plunkett, who it might be inferred, remained directors of Renkon although neither had any day-to-day involvement in the running of the business at the time. The decision was taken then to give notice requiring a surrender. That was given, although some months later, Renkon sought unsuccessfully to exercise an option to renew the lease.

1. The minutes of the meeting on 29 September 1992, at which the decision was taken to exercise the right to surrender the lease, record that the only issue of apparent significance discussed was the level of the rent being paid. The valuation obtained in relation to the rental suggested the rent being paid was in the order of $150,000 per annum above market. A discussion occurred about the Covenant Agreement, and the meeting was advised that the covenant remained on the title. The minutes record the resolution to surrender the lease, and to offer to continue to lease the premises for a period at a reduced rental.

1. As I have said, counsel for the defendants submitted that it was highly improbable that Renkon would have exercised the right to surrender within the window of opportunity available to it, even had it been reminded of its existence. Counsel for the plaintiffs, on the other hand, submitted that it was an "inexorable" inference that must be drawn that, since Renkon sought a surrender very soon after Mr Manser brought the possibility of it to its attention in September 1992, it would have done the same had it been brought to its attention in May 1991. He submitted that nothing had changed in the intervening period. He submitted that the business continued to be a profitable one, but continued to make unreasonable demands on the plaintiffs in terms of its repair requirements.  Ms Rees' evidence was not that the repairs were placing an unreasonable demand on the business, but that the repairs were ongoing. Counsel for the plaintiffs submitted that, for the submissions of counsel for the defendants to have any weight, he would need to point to some circumstances to raise a reason why Ms Rees would have acted differently in the middle of 1991 to the way Renkon acted in September 1992.

1. Another issue which was the subject of submissions was the use to which the right to seek a surrender might have been put other than to seek an outright surrender of the lease. Counsel for the plaintiffs submitted that, if I were not satisfied Renkon would have given notice to surrender, it still lost a valuable commercial opportunity to negotiate with Mr Ambrose for more favourable terms in the lease by using the capacity to surrender as a bargaining tool. I would, in the circumstances, need to value that lost opportunity to extract a significant commercial bargain from Mr Ambrose. Counsel pointed to the fact that, when faced with a proposition in September 1992 to reduce the rent to keep Renkon as a tenant, Mr Ambrose did not roll over and do so. However, the plaintiffs would have been in a much stronger position to negotiate 15 months before. The difficulty with that submission is that there is a paucity of evidence about the removal of the covenant. The Court was told it was removed approximately a week after Renkon sought to surrender the lease at the end of September 1992. There is nothing to suggest that could not have happened in 1991, such that any use as a bargaining tool would have been very quickly lost.

1. The plaintiffs were, in the middle of 1991 and in September 1992, operating a business that was trading well and was profitable but which, because Renkon had entered into an onerous lease as far as repair obligations were concerned, had ongoing repair costs. I infer that, notwithstanding those repair costs, the business, because it was making a profit, was capable of meeting all its expenses including those costs. The obligation to make repairs was a matter which was the subject of discussion with Mr Ambrose over this period as was, I infer, the payment of the level of rent which Renkon was obligated to pay. There was no evidence about the precise nature of the negotiations and whether, for example, Ms Rees was suggesting that Renkon would pay for the repairs, but the rent should be reduced. The fact of the matter was that Mr Ambrose was in the driver's seat, so to speak, as at June 1991, because Renkon was bound to repair and pay the rent. I would accept that Mr Ambrose's bargaining position might have been weakened after 1 July 1991 with the covenant still in place. However, as I have noted, that situation could have quickly altered.     

1. It may have been that Renkon, had it been alert to the terms of the Covenant Agreement, might have, in any event, because the business was and had been doing so well, decided to keep going with it regardless. It may simply have been the passage of time which brought the plaintiffs to the position they eventually adopted in September 1992. On the other hand, that position may have been reached far earlier with knowledge of the position relating to the covenant.

1. As Evans J said in Wilson v State of Tasmania [1999] TASSC 145 at par[69], this being part of the passage quoted above in par[17], "It is, of course, not certain that my prognostications are correct. They relate to hypothetical events which may or may not have occurred ….". In this case, the sentence would end "regardless of the advice given by Mr Doolan". In this case, it is possible that, with that advice, Renkon might have given notice unconditionally, used the capacity to do so as a bargaining tool or, recognizing that the failure to remove the covenant was of limited use as a bargaining tool and accepting that the business was continuing to be a good one, done nothing different to what it did. Each of these alternatives was a real possibility. Renkon is, in my view, entitled to be compensated for the loss of the opportunity to take one of the first two steps, although that compensation must be discounted to reflect the lack of certainty that it would have done so.

Damages claimed in par 1 of the particulars

1. There is no dispute that, had the right to surrender been exercised within a reasonable time, Ambrose would have had the capacity to pay the sum of $820,505 which is the sum the parties are agreed it would have had to pay. Any claim by Renkon to that sum needs however to be discounted to reflect the possibilities that I have identified. I do not accept the submission of counsel for the plaintiffs that there was an "inexorable" inference to be drawn that Renkon would have, with 100 percent certainty, exercised its right to surrender within a reasonable time. The evidence suggests that the possibility was far less than that, although it is simply not possible to determine with precision an actual percentage figure. In the circumstances, taking into account the various possibilities, I find that Renkon is entitled to recover the sum of $410,000 under this head of damages.

Damages in the nature of Hungerfords v Walker damages (par2 of particulars)

1. As their Honours Mason CJ and Wilson J said in the opening words of their joint judgment in Hungerfords v Walker (1989) 171 CLR 125, the appeal in that matter raised the issue of whether, at common law, a court when awarding damages for breach of contract or negligence, could include an award, assessed by reference to appropriate interest rates, for the loss of use of money lost as a direct consequence of the breach of contract or negligence of the defendant. The Court, having examined the history of such and similar claims found that such an award was appropriate.

1. That is what Renkon here claims. Renkon, in its statement of claim at par26, pleaded that it had been deprived of the receipt and use of the sum of $820,505. In the following paragraph, it pleaded that, had it not been so deprived, it would have used the $820,505 to reduce its borrowings, in respect of which it was obliged to pay interest. Counsel for the defendants submitted that there was no pleading and no evidence of what the borrowings were which were referred to in par27, and there was no evidence that Renkon had paid any interest on its borrowings at any time. The particulars, it was submitted, seemed to be predicated on an assumption that, had Renkon obtained the $820,505, it would have invested it. There was no evidence at all to that effect. Counsel for the defendants also suggested that there was no evidence of any inability on the part of Renkon to pay debts because the money was not available.

1. The only evidence about these issues came from Ms Rees. She told the Court that, to fund the purchase of the business, Renkon borrowed from the Commonwealth Bank and "our properties were put up as guarantee for the loan". An equitable mortgage was given to the bank to support borrowings of $1,250,000. After the receivers had moved in, the bank made demand of the guarantors for $1,127,385.62, of which $124,589 was said to be interest accrued on the borrowings.  As far as Ms Rees was aware, Renkon's indebtedness was fully met as a result of the bank taking possession of three Gold Coast properties and Rodney Plunkett's home in respect of which security had been given to the bank. There was no evidence about what those properties were sold for and whether the bank was fully paid out or perhaps compromised its debt. Ms Rees' evidence was to the effect that, had Mr Ambrose given them their money back, "I'd have paid the bank back and I would have got on with my life." 

1. It must flow from that evidence that, had Renkon exercised its rights in a timely fashion and received the sum of $820,505 from Ambrose, it would have paid that amount to the Commonwealth Bank in reduction of its debt. The only inference to be drawn is that Renkon would still have owed some few hundred thousand dollars to the bank, and individual directors would still have owned their properties. It is clearly not the case, and there is certainly no evidence to that effect that, had Renkon received the sum of $820,505 from Ambrose, it would have invested the sum and been paid interest of which it has been deprived. The figures set out in par2 of the particulars cannot in those circumstances be an accurate representation of any loss.

1. The submission from counsel for the defendants was that, given the paucity of evidence, the plaintiffs had not made out a proper case for damages under this heading at all.

1. Counsel for the plaintiffs submitted that the measure of damages set out in par2 of the particulars was not put forward as "the" measure of damages but as "a" measure. In effect, what counsel submitted was, Renkon did not get this money, it could not therefore reduce its debt, it incurred interest until such time as the guarantors' properties were sold, and the individual guarantors lost the capacity to obtain income by way of rent on those properties. I should do the best I can in those circumstances.

1. There were, I would have to say, gaping holes in the evidence. There was no evidence as to what Renkon's interest payments were between September 1992 and when it ceased to operate the business. There was no evidence of what income the business was generating in the same period. The only evidence was that a profit was still being made in September 1992 and, therefore, I can infer that whatever interest was due was being paid.  I have no idea when that stopped.   There is evidence that the Commonwealth Bank made demands for repayment of debt by notices dated 10 August 1994. Evidence was led from Ms Rees that a portion of the money demanded was interest. However, that information is not reflected in the demands nor was there any evidence to explain what interest that was, more particularly to what period it related. There was also no evidence about when the properties, the subject of the guarantees, were sold, and what further interest accrued on debt until capital repayments were made from those sales. As conceded by counsel for the plaintiffs, there was also no evidence to support his submission that, once those properties had been sold, individual guarantors lost the capacity to earn rent from them. One property, in any event, that of the Plunketts, was their home and not a rental property as I understood the evidence.

1. Another issue addressed by counsel for the plaintiffs arose out of submissions by counsel for the defendants which appeared to suggest that since the indebtedness of Renkon to the bank had been discharged by the sale of the guarantors' property, Renkon had no debt thereafter, and it could not be said it had therefore suffered from the loss of use of the money. This clearly cannot be entirely correct. Renkon was a company established by the individual directors for the purpose of the purchase  of the business. The company borrowed money to fund the purchase. The directors were required to guarantee those borrowings. The directors, as guarantors, were called upon to surrender their properties over which the bank had taken security to support the guarantee. Those properties were sold. I infer from the evidence that none of the guarantors saw any surplus returned to them after those sales. The guarantors would, in the circumstances, be entitled to an indemnity from Renkon in respect of whatever they had paid to clear its indebtedness to the bank. Renkon would therefore have had a continuing obligation to the guarantors. (See commentary in The Modern Contract of Guarantee, 3rd ed, by O'Donovan and Phillips at 586 and following). Renkon could have been or might be sued by the guarantors.

1. While it might flow that Renkon could have been or might be sued by the guarantors who had lost their own properties, there was no evidence Renkon had been sued or that it had any ongoing obligation to pay interest to anyone. There was also no evidence as to Renkon's financial status at any stage in these proceedings. It must be remembered that the party making the claim against the defendants, as opposed to the loosely described plaintiffs in these proceedings, is Renkon. Any judgment amount will be payable to Renkon and not its individual directors, although they may ultimately have claims on any such money. The individual directors might have been said to have suffered from the loss of use of the money Renkon might have obtained. However, that is not the claim with which I am dealing.  I am dealing with a claim by Renkon for loss of use of a sum of money

1. I am not satisfied that Renkon is entitled to any amount under this heading of damages.

Damages claimed in pars3, 4 and 5 of the particulars

1. Each of these claims is one by Renkon for which it is entitled to be compensated on the same basis as the claim in par1 of the particulars. The amount claimed in par3, including the daily rate of interest from 27 April to today, is $93,349.87. Adopting the same approach to discounting this claim as I have in respect of the earlier claim, I find that Renkon is entitled to recover the sum of $46,674.

1. The amount claimed in par4, including the daily rate of interest for the same period identified in the preceding paragraph, is $550,362.17. Adopting the same approach, I find Renkon is entitled to recover the sum of $275,181.

1. As to the claim in par5, that, plus interest to today, is $61,467.47. Again, adopting the same approach, I find Renkon is entitled to recover the sum of $30,733.

Total damages assessed

1. The total damages which I find that Renkon is entitled to recover is the sum of $762,588.

Contributory negligence

1. A final issue to be determined is the claim by the defendants that any amount of damages assessed as being recoverable by Renkon should be reduced on the basis of its contributory negligence. The defendants pleaded in par28 of their defence dated 14 July 2006:

"Further, or alternatively, the third party says that, if the first-named defendant suffers damage or is at risk of suffering damage, as pleaded in paragraphs 25 and 27 of the statement of claim, such damage and/or the risk thereof will have been caused or contributed to by the negligence of the first-named defendant.

PARTICULARS

(a)Entering the agreements dated 29 and 30 June, 1989 and the lease pleaded in the statement of claim although it had been advised by the third party that it was not in its interests to do so.

(b)Failing to take any step between 1 July, 1991 and 30 September 1992 to enforce the       rights given to it pursuant to the clause pleaded in paragraph 10 of the statement of claim."

1. There is no doubt that Renkon and its directors were advised by Mr Doolan in June 1989 of a number of matters relating to the transactions into which they were about to enter that were disadvantageous  to them. There is also no doubt that they elected to proceed with the transactions irrespective of that advice. The question which arises, however, is can they be said to have contributed to their own loss by so doing. It is trite to say that, had they accepted the advice and not gone ahead with the transactions, we would not be here now. However, by simply entering into the transactions, they cannot be said to have contributed to their loss. It cannot be said that the ultimate claimed loss, for example, was inevitable as a result of the parties having entered into transactions which were disadvantageous to them. The ultimate claimed loss flowed from actions which occurred or did not occur nearly two years later as a result of events other than the entering into of the transactions themselves. No finding of contributory negligence can, in my view, flow from this particular.

1. As to the second particular, if it is accepted that any successful attempt to exercise the right to surrender the lease had to be undertaken between 1 July 1991 and about the end of September that year and, as I said earlier, neither counsel argued to the contrary, what Renkon might or might not have done in relation to the Covenant Agreement for a year after September 1991 can have little relevance to the issue of contributory negligence. The argument needs to be confined to the limited period after 1 July 1991. There can be no doubt that the plaintiffs knew about the Covenant Agreement, the reasons for it and the advice they had received about it when completion of the purchase occurred at the end of June 1989. For there to be a finding of contributory negligence based on this particular, I would need to be satisfied that Renkon, as at July to September 1991, was aware of its rights under the Covenant Agreement or, at the very least, it should have been and was reckless as to the state of its knowledge. In my view, it would also have to have been aware of the importance of the terms of the Covenant Agreement in the context in which it eventually held so much importance, that is, as a means of avoiding the lease and getting out of the business.

1. Ms Rees was the only representative of Renkon to give evidence. She was the person who completed interrogatories on behalf of Renkon during the course of proceedings, and she was the person who, it appears, had most contact with Mr Doolan and later Mr Ellis. She told the Court that, at the time she spoke to Mr Doolan in May 1991, she did not recall the issue relating to the covenant. While I made no specific finding as to that in my September 2009 reasons, it may be inferred from my final conclusion that she did not, or that if she did, it did not occur to her as a means of avoiding the lease altogether and getting out of the business. That is consistent with her evidence about the covenant. She said she was told it would be removed within two years, that Mr Ambrose had been operating the business for years effectively in breach of the covenant, and that he said he did not see a problem. Even if Renkon, by its directors, recalled the terms of the Covenant Agreement in or about July 1991, its importance in the end to what was sought to be achieved was not, in my view, apparent to them at that time. Ms Rees actually said that the Covenant Agreement was never intended to be a means of getting out of the contract. It was simply a means of Renkon getting its money back if the covenant was enforced.

1. I am satisfied that, even if Ms Rees, and by inference Renkon, was alert to the existence of the Covenant Agreement between July and September 1991, they did not necessarily understand that it could be used to achieve the end ultimately sought, and were unlikely to have done so without specific legal advice as was eventually obtained in September 1992.

1. I am of the view that no finding of contributory negligence can be made based on the second pleaded particular.

Conclusion

1. Renkon is therefore entitled to recover from the defendants the sum of $762,588.