RV Pty Limited v Connector Park Pty Ltd (No 2)

[2017] TASSC 22

[2017] TASSC 22

COURT:  SUPREME COURT OF TASMANIA

CITATION:                 RV Pty Limited v Connector Park Pty Ltd (No 2) [2017] TASSC 22

PARTIES:  RV PTY LIMITED
  v
  CONNECTOR PARK PTY LTD

FILE NO:  5/2006
DELIVERED ON:  5 April 2017
DELIVERED AT:  Hobart
HEARING DATES:  9-13, 16-19 May 2016
JUDGMENT OF:  Blow CJ

CATCHWORDS:

Damages – Measure and remoteness of damages in actions for breach of contract – Particular contracts – Contract for construction of road – Loss of opportunity to develop subdivision earlier than was possible.

IOOF Building Society Pty Ltd v Foxeden Pty Ltd [2009] VSCA 138, 23 VR 536; Hart Security Australia Pty Ltd v Boucousis [2014] NSWSC 1654, 102 ACSR 557; North East Solution Pty Ltd v Masters Home Improvement Australia Pty Ltd [2016] VSC 1, referred to.
Aust Dig Damages [18]

REPRESENTATION:

Counsel:
             Plaintiff:  S B McElwaine SC
             Defendant:  G Williams
Solicitors:
             Plaintiff:  Shaun McElwaine + Associates
             Defendant:  Leonard Fernandez

Judgment Number:  [2017] TASSC 22
Number of paragraphs:  107

Serial No 22/2017

File No 5/2006

RV PTY LIMITED v CONNECTOR PARK PTY LTD (No 2)

REASONS FOR JUDGMENT  BLOW CJ

5 April 2017

1. This case concerns a dispute between two land development companies in relation to a contract which required one of them to construct an access road. The two companies subdivided adjacent parcels of land at Kings Meadows on the outskirts of Launceston. The plaintiff, RV Pty Limited, undertook a large residential subdivision which I will refer to as the Mount Pleasant subdivision. The defendant, Connector Park Pty Ltd, undertook a commercial and light industrial subdivision of its adjoining land which I will refer to as the "Connector Park land". The two companies were parties to a contract dated 26 August 2004 which, amongst other things, required the defendant to complete construction of a roadway called "the Connector Park Roadway" by 6 January 2005, and to do all things necessary to ensure that that roadway was taken over as a road maintainable by the Launceston City Council by 6 July 2005.  In breach of that contract, the defendant failed to do those things by the required dates. 

2. On 21 February 2006, the plaintiff brought this action, seeking specific performance of the contract and claiming damages.  On 17 June 2008 Tennent J made an order, with the consent of both parties, requiring the defendant to specifically perform its contractual obligations in relation to the roadway, and adjourning the plaintiff's claim for damages. The construction of the roadway was completed in July 2008.  The bulk of the plaintiff's land remained unsubdivided until the granting of a permit for a subdivision by the council in August 2009. A number of subsequent permits were granted as the subdivision was developed in stages.

3. The plaintiff's claim for damages proceeded to trial before me.  The plaintiff contends that, as a result of the defendant's delay in performing its contractual obligations in relation to the roadway, its development of the Mount Pleasant subdivision, and the sale of most of the lots in that subdivision, were delayed by about 3½ years, and that substantial financial losses resulted.  It contends that it was unable to obtain planning approval for most of the subdivision until the roadway was constructed and dedicated as a public highway. It contends that, had the defendant discharged its contractual obligations in a timely manner, it would have acquired the benefit of having a public highway constructed to the boundary of its land; that it would have pursued, earlier than it did, development applications for the residential subdivision of its land; and that, but for the breach of contract, there was a substantial, and not merely speculative, prospect that it would have acquired the benefit of subdivision approval from the council at an earlier time.  It contends that from January 2005 until June 2009 the failure of the defendant to construct the roadway and procure its dedication as a highway delayed the receipt of cashflow from the developments which it was ultimately able to undertake, and thereby caused it substantial financial losses.  It adduced evidence from a chartered accountant, Mr Rands, to the effect that, as at September 2014, those losses were within the range of $1.879 million to $2.710 million.

4. There is a counterclaim.  The contract required the plaintiff, subject to certain terms and conditions, to pay the defendant $800,000 plus GST in three instalments. The first instalment, amounting to $400,000 plus GST, was paid in 2005.  The plaintiff has not paid the second and third instalments, each amounting to $200,000 plus GST.  It contends that, on a proper construction of the contract, it was not required to do so because its liability to pay was conditional upon the defendant performing its obligations in relation to the roadway in a timely manner. The defendant contends otherwise, and has counterclaimed $440,000, comprising $400,000 plus 10% GST.

The contract

1. The parties to the contract were the plaintiff, the defendant, and the executors of the estate of the late Keith Cameron Holyman.  Until his death, Mr Holyman was the owner of the Mount Pleasant estate, which included the historic Mount Pleasant homestead and the land that was subsequently acquired by the plaintiff.  Before the execution of the contract on 26 August 2004, the following events occurred:

   ·     On 29 December 1998 the defendant obtained a planning permit from the council for a staged 17-lot subdivision of its Connector Park land.  The number of the permit was SD.00.98.051.  The permit provided for the construction of roads within the subdivision, including roads extending from the Kings Meadows Connector to the Mount Pleasant land now owned by the plaintiff. 

   ·     On 3 August 1999 Mr Holyman entered into a contract with the defendant in relation to about 4 hectares of his land.  The parcel in question was adjacent to the defendant's land, and had a small frontage to the northeast onto Ernest Street. It was agreed that the defendant would construct a roadway through that parcel of land from Ernest Street to the balance of Mr Holyman's land; that the defendant would maintain that roadway until it was taken over by the council as a public road; and that Mr Holyman would then transfer the land on either side of that road, comprising about 3.17 hectares, to the defendant.  That is to say, Mr Holyman agreed to transfer that land to the defendant in consideration of the defendant constructing through the middle of it a road that was intended to become a public highway.  This proposed road was different from the roadway provided for in the August 2004 contract. This roadway was intended to connect to Ernest Street, to the east.  The roadway to which this action relates runs south from the land originally owned by Mr Holyman, through the defendant's Connector Park land. 

   ·     On 19 December 2003 the council granted a permit, number DA0683/2003, for a 10-lot subdivision of the land that Mr Holyman had agreed to transfer.

   ·     On 29 March 2004 the council granted a second permit, number DA0069/2004, permitting a 14-lot subdivision of the same land. 

   ·     The plaintiff contracted to purchase most of the Mount Pleasant estate, including the parcel that was the subject of the 1999 contract, but excluding the homestead and some surrounding land.  Part of the purchased land was zoned as rural under the Launceston Planning Scheme 1996.

2. The principal provisions in the contract of 26 August 2004 were as follows:

   ·     The 1999 agreement between Mr Holyman and the defendant was terminated.

   ·     On settlement the plaintiff would pay the defendant a first instalment of $400,000 plus GST.

   ·     Settlement would take place the following day.

   ·     On settlement the defendant would deliver to the plaintiff copies of planning permits DA0683/2003 and DA0069/2004, and any associated engineering plans or drawings approved by the council.

   ·     On settlement the plaintiff would grant rights of carriageway in favour of the defendant's land over certain roadways between that land and Ernest Street, to subsist until a road provided for in either permit DA0683/2003 or permit DA0069/2004 became a public road maintainable by the council. 

   ·     On settlement, the defendant would grant to the plaintiff a right of carriageway over the Connector Park roadway, for the benefit of the land acquired by the plaintiff, to subsist until the Connector Park roadway was taken over as a public road maintainable by the council.

   ·     The defendant would lodge with the council either an application for a permit to subdivide the Connector Park land into one lot bisected by the Connector Park roadway or, alternatively, an application for a minor amendment to permit SD.00.98.051 to bring forward the staging of the roadway lots in its Connector Park subdivision to enable the council to take over the Connector Park roadway once it had been constructed in accordance with certain provisions of the contract, which are set out below.

   ·     The defendant would complete construction of the Connector Park roadway by 6 January 2005 and do all things necessary to ensure that it was taken over as a road maintainable by the council by 6 July 2005.

   ·     Once the Connector Park roadway was taken over as a road maintainable by the council, the plaintiff would pay the defendant a further $200,000 plus GST. 

   ·     If the land zoned rural that was included in the plaintiff's purchase was rezoned as residential, the plaintiff would then pay the defendant a further $200,000 plus GST.

3. The provisions of the contract that are of critical importance in this case are the following:

   "5.6    Connector Park to complete roadway

   Connector Park will complete construction of the Connector Park Roadway by 6 January 2005 with appropriately sealed pavements, power and street lighting as specified by Council in accordance with subclause 5.7, and Connector Park will do all things necessary to ensure that the Connector Park Roadway is taken over as a road maintainable by Council by 6 July 2005.

   5.7Standard of Roadway

   Connector Park will at its cost construct the Connector Park Roadway to the standard specified by Council in conditions 3(d) and 3(e) of permit SD.00.98.051, except that the parties agree that the standard of road over lot 108 referred to in permit SD.00.98.051 will be a minimum width of 9.0m sealed with hot mix on an appropriately constructed pavement. For no additional consideration, Connector Park will allow JAC [the plaintiff] to construct a footpath at JAC's cost within the road reserve covered by the Connector Park Roadway if Council requires such pedestrian access as a condition of any approval for a subdivision of the Freehold Property.

   5.8Payment on completion

   In consideration for Connector Park completing its obligations as set out in this clause 5:

   (a) JAC will pay Connector Park $200,000 plus GST once a certificate is issued in respect of the Connector Park Roadway in accordance with s10(7) of the Local Government (Highways) Act 1982 such that the Connector Park Roadway is taken over as a road maintainable by Council, subject to receipt of a Tax Invoice from Connector Park for that sum; and

   (b)  JAC will pay Connector Park a further $200,000 plus GST if JAC is successful in rezoning the rural zoned area of the Freehold Property to some form of residential zone under Part 3 of the Launceston Planning Scheme 1996, subject to receipt of a Tax Invoice from Connector Park for that sum."

The counterclaim

1. It is convenient to deal with the counterclaim before addressing the plaintiff's claim.  The outcome of the counterclaim depends upon the interpretation of the introductory words of cl 5.8, namely, "In consideration for Connector Park completing its obligations as set out in this clause 5 …".

2. The defendant contends that, because it undertook all the work required by cl 5.6, it completed "its obligations as set out in this clause 5", and is therefore entitled to the payment of the two sums totalling $400,000 plus GST.  The plaintiff contends that, because the required construction work was not completed by 6 January 2005 as required by cl 5.6, and because the defendant did not do all things necessary to ensure that the roadway was taken over as a road maintainable by the council by 6 July 2005 as required by that clause, it cannot be said that the defendant completed "its obligations as set out in this clause 5".  It contends that the defendant completed its obligations after the deadlines provided for in cl 5.6, and thus not "as set out in" cl 5.

3. The proper approach to the interpretation of the critical words in cl 5.8 is as stated by Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52, 219 CLR 165 at [40], where their Honours said:

   "The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction."

4. The purposes and objects of the parties' transaction are clear. The defendant agreed (a) to terminate its contract for the purchase of about 3.17 hectares of land near Ernest Street, enabling the plaintiff to acquire that land from Mr Holyman's executors; and (b) to construct the Connector Park roadway and arrange for it to be taken over as a public road maintainable by the council, so that there would be much better road access to the land that the plaintiff hoped to subdivide. The plaintiff proposed to make money from a large residential subdivision.  The acquisition of the 3.17 hectares and the construction of the roadway would help it to achieve that objective.  In return, the plaintiff promised to pay the defendant a total of $600,000 plus GST, or $800,000 plus GST if the rezoning of the rural land went through, as well as allowing the defendant a temporary right of way between its Connector Park land and Ernest Street.  The amounts that the plaintiff promised to pay may well have been determined by reference not only to the value of the 3.17 hectares and the cost of constructing the roadway, but also by reference to the commercial advantages accruing to the plaintiff as a subdivision developer as a result of the availability of road access to the subdivision site from both Ernest Street and the Kings Meadows Connector. It is significant that the defendant had been proposing to construct the Connector Park roadway in accordance with its subdivision permit of 29 December 1998. The construction of that roadway resulted in advantages to both parties as subdividers of their respective lands. 

5. The plaintiff's contention as to cl 5.8 is that a reasonable person would have understood both parties to have intended that the defendant would become entitled to either $200,000 or $400,000, plus GST, if it fulfilled the various obligations imposed by cl 5.8 within the time limits specified in that clause, but that it would be entitled to none of that money if any such obligation was not performed on time, even though the defendant would have a continuing duty to fulfil every such obligation.  That is to say, if the defendant completed the construction of the roadway, but did so later than the contract required, then its right to receive payment in respect of the work and materials involved, and in respect of the commercial advantage thereby conferred on the plaintiff, would be lost.  The consequences for the defendant would be so extreme in such a situation that I do not think that any reasonable person would regard the parties as having intended cl 5.8 to have the meaning contended for by the plaintiff.

6. An analysis of the text of the clause gives some support to the interpretation contended for by the defendant.  There is no express reference to time limits in the introductory words of cl 5.8.  If the parties had intended monies to be payable under that clause only if contractual obligations were fulfilled on time, they could very easily have used words that made such an intention clear.  They could have referred to the defendant "completing its obligations as and when required by this clause 5".  Further the use of the word "consideration" suggests an intention that the defendant was to be paid for doing what it promised to do, rather than getting paid a bonus, or two bonuses, if its contractual obligations were fulfilled within a certain time. 

7. In my view a reasonable person would not have understood the introductory words of cl 5.8 as meaning that the defendant was to become entitled to payments under that clause only if it completed its relevant contractual obligations in accordance with such time limits as were specified in cl 5.

8. The Connector Park roadway was taken over by the council. The area zoned rural was rezoned as residential under the Launceston Interim Planning Scheme 2012. Although cl 5.8(b) expressly provided for a payment of $200,000 plus GST only in respect of rezoning "under Part 3 of the Launceston Planning Scheme 1996", the plaintiff accepts that the superseding of that planning scheme by the 2012 interim scheme makes no difference to its obligations.  Once the roadway was taken over by the council, the plaintiff became liable to pay the defendant $200,000 plus GST pursuant to cl 5.8(a).  Once the rezoning took effect, the plaintiff became liable to pay the defendant a further $200,000 plus GST pursuant to cl 5.8(b).  Those amounts have not been paid.

9. The defendant is therefore entitled to judgment for $440,000 on the counterclaim.  It made no claim for interest.

The plaintiff's claim

1. The plaintiff is claiming damages for lost opportunity.  The basis for awarding damages for a lost opportunity was explained by French CJ, Kiefel J (as she then was) and Keane J in Badenach v Calvert [2016] HCA 18, 331 ALR 48 at [39]-[41] as follows:

   "39   … It may be accepted that an opportunity which is lost may be compensable in tort. But that is because the opportunity is itself of some value. An opportunity will be of value where there is a substantial, and not a merely speculative, prospect that a benefit will be acquired or a detriment avoided.

   40    It remains necessary to prove, to the usual standard, that there was a substantial prospect of a beneficial outcomehttp:// - . This requires evidence of what would have been done if the opportunity had been afforded. …

   41    The onus of proving causation of loss is not discharged by a finding that there was more than a negligible chance that the outcome would be favourable, or even by a finding that there was a substantial chance of such an outcome. The onus is only discharged where a plaintiff can prove that it was more probable than not that they would have received a valuable opportunity. ...". [Footnotes omitted.]

2. The plaintiff's contentions are essentially as follows:

   ·     But for the defendant's breach of contract, a public road from the Kings Meadows Connector to the boundary of the plaintiff's land would have been constructed no later than 6 January 2005, and would have been taken over by the council no later than 6 July 2005. 

   ·     But for the defendant's breach of contract, the plaintiff would have made applications to the council for planning permits for the subdivision of its land about 3½ years earlier than it did.

   ·     But for the defendant's breach of contract, there was a substantial, not merely speculative, prospect that the plaintiff would have acquired the benefit of subdivision permits from the council about 3½ years earlier than it did.

   ·     The damages for the plaintiff's lost opportunity can be assessed in an appropriate way by undertaking a delayed cashflow calculation of the sort undertaken by Mr Rands. 

The defendant's contentions

1. The defendant's principal contentions in relation to the plaintiff's claim can be summarised as follows:

   ·     It relies upon cl 6.11 of the contract, which provided, "Time is not of the essence as regards any date or period determined under this document but may be made of the essence by a party giving twenty eight (28) days prior Notice to the other party making time of the essence …". 

   ·     In written submissions filed before the trial, counsel for the defendant argued that the effect of the order for specific performance made on 17 June 2008 was to give the plaintiff an extension of time for the performance of its obligations to construct the roadway.

   ·     The defendant pleaded that "the plaintiff failed to mitigate its alleged loss by failing to engage another contractor to complete the roadworks within a reasonable time after the alleged breach", and that "that failure to mitigate severed any causal connection between the loss claimed and the breach alleged".

   ·     It contended that the plaintiff had not established that its delay in constructing the roadway had resulted in any loss or loss of opportunity by the plaintiff because there were multiple obstacles to the obtaining of a planning permit for a subdivision on the scale ultimately approved on 29 June 2009.  It contended that those obstacles included traffic issues, stormwater issues, heritage issues, visual impact issues, demand issues, and issues as to orderly planning.

   ·     It contended that, because of the matters listed above, no loss had been proven, and the plaintiff was entitled only to nominal damages.

   ·     It contended that the calculations undertaken by Mr Rands produced estimates of losses that were excessive because of various errors, omissions and inappropriate assumptions.

Time for performance

1. It is true that cl 6.11 of the contract provided that time was not of the essence, and that that clause applied to the time limits specified in cl 5.6 for the construction of the roadway and the taking over of that road as one maintainable by the council.  An express provision in a contract making time of the essence can make a difference as to the consequences of a breach of contract.  If time is of the essence, then the innocent party may be entitled to terminate the contract following a breach.  When, as in this case, time is not of the essence, the failure to perform a contractual obligation within a specified time amounts to a breach of contract entitling the innocent party to damages at common law.  The fact that time was not of the essence makes no difference in relation to the plaintiff's claim.

2. At common law, stipulations as to time were deemed to be of the essence of a contract, so that a failure to adhere to a time stipulation would entitle the other party to terminate the contract: Noble v Edwardes (1877) 5 Ch D 378 at 393. Courts of equity developed a doctrine that, as a general rule, time stipulations would be treated as not of the essence: Stickney v Keeble [1915] AC 386. Now that the rules of common law and equity are administered concurrently, the equitable rules prevail. However courts of equity never held that a party who failed to perform a contractual obligation on time was not liable for damages for breach: Canning v Temby (1906) 3 CLR 419 at 426.

3. It is true that the consent order of 17 June 2008 gave the defendant until 5pm on 25 July 2008 to complete its construction obligations under cl 5.7, and until 5pm on 1 August 2008 to obtain the certificate referred to in cl 5.8(a). However that order did not result in the defendant somehow ceasing to be in breach of contract. The effect of the new time requirements was that, if they were not complied with, the defendant would be not only in breach of contract, but could also be in contempt of court.

The mitigation issue

1. As I have said, the defendant contends that the plaintiff failed to mitigate its loss by failing to engage another contractor to complete the roadworks within a reasonable time after the alleged breach. 

2. The plaintiff accepts that, at least at common law, it had a duty to take all reasonable steps to mitigate its loss: Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603 per Brennan CJ at [3] and Hayne J at [134].

3. However the land over which the roadway was to be constructed belonged to the defendant.  The defendant is contending that the plaintiff had a duty to engage another contractor to enter onto its land and construct the roadway.

4. The defendant relies on cl 5.4 of the contract which provided as follows:

   "5.4   Access for works

   On Settlement Connector Park grants to JAC [the plaintiff] a right of carriageway over the Connector Park Roadway for the benefit of the Freehold Property [the plaintiff's land] until the Connector Park Roadway is taken over as a public road maintainable by Council."

5. Whenever a right of way has been granted without the rights of the dominant owner having been expressly defined, the dominant owner has "such ancillary rights as are reasonably necessary to the effective and reasonable exercise of the rights expressly granted": Zenere v Leate (1980) 1 BPR 9,300 at 9,305 (McLelland J, Supreme Court of New South Wales); Bland v Levi [2000] NSWSC 161, 9 BPR 17,517 at [13]-[22]. Any dealing with the land in excess of the dominant owner's right will be an actionable trespass: Dand v Kingscote (1840) 6 M & W 175, 151 ER 370; Bland v Levi at [25].

6. In order to determine what ancillary rights were reasonably necessary to the effective and reasonable exercise of the right of carriageway granted to the plaintiff, it is necessary to take into account the heading of cl 5.4, which read, "Access for works", and also to take into account cl 5.3, which read as follows:

   "5.3   Connector Park to construct roadway

   Connector Park will at its costs within three (3) months of Settlement partially construct the Connector Park Roadway of a sufficient standard to facilitate reasonable access to the Freehold Property by JAC and its contractors to carry out development works on the Freehold Property."

7. Plainly the right of carriageway was granted to the plaintiff so that it and its contractors could use that roadway during the development of its subdivision. It is quite clear that the construction of the roadway in accordance with cl 5.7 of the contract involved doing far more than was reasonably necessary for the effective exercise of the right of carriageway that had been granted for that purpose. Clause 5.7, which is set out at [7] above, required the defendant to construct the roadway "to the standard specified by Council in conditions 3(d) and 3(e) of permit SD 00 98 051". Condition 3(d) of that permit required the following:

   "(i)An 11.0m wide, two coat spray seal on an appropriately constructed pavement;

   (ii)Linemarking to designate the centreline and the edges of the traffic lanes;

   (iii)All required intersection islands designed so as to allow passage of B-Double vehicle [sic] within the road pavement;

   (iv)All necessary signage and guide posts;

   (v)1.5m wide gravel shoulders on each side;

   (vi)Table drains on each side shaped and lined to convey flows at velocities of less than 1.5 m/sec and a flow depth of less than 300mm;

   (vii)Road and driveway culverts where required, complete with concrete or masonry endwalls.

   (viii)Graded, topsoiled and planted verges."

8. It follows that the plaintiff's rights as the grantee of the right of carriageway fell far short of entitling it to engage a contractor to construct the roadway to the standard required by cl 5.7. It follows that the defence relating to the mitigation of damage must fail.  The plaintiff did not have a legal right to complete all the roadworks that the contract required the defendant to complete.  It or a contractor could only have completed the relevant works by committing an actionable trespass. 

9. Any attempt by the plaintiff to mitigate its damage by undertaking roadworks would have been likely to give rise to a dispute as to the extent of its rights as the grantee of a right of carriageway.  Its duty to take reasonable steps did not require it to undertake works of such a nature that its right to undertake them was not reasonably clear.

10. Even if a contractor engaged by the plaintiff had completed the required roadworks, more was required before the roadway could be taken over by the council as a public road.  The roadway was but one part of the defendant's subdivision.  Because of various provisions in the Local Government (Highways) Act 1982 and the Local Government (Building and Miscellaneous Provisions) Act 1993, the taking over of the road by the council could not have occurred until the defendant's subdivision had reached the stage where the plan of subdivision was sealed by the council.

The saga of the subdivision

1. In order to address the parties' contentions as to what would or might have happened if there had been no breach of contract, it is necessary for me to set out the history of the plaintiff's dealings with the council and others that led up to the granting of a permit by the council in August 2009 for an 80-lot subdivision.  Before then, the council had permitted subdivision development to proceed only in relation to a small area of the plaintiff's land adjacent to Ernest Street. That was referred to as "Stage 1". After then, the council permitted the plaintiff to develop the rest of its land, stage by stage.

The development application of 20 October 2004

1. The Mount Pleasant subdivision eventually comprised over 200 lots.  On 20 October 2004 the plaintiff made a development application to the council, seeking a permit for a three-stage 58-lot subdivision.  There were a number of impediments to the full development of the subdivision at that stage, particularly in relation to roadways and zoning.  Road access for the subdivision was possible only from Ernest Street and through the Connector Park land.  Because Ernest Street was an ordinary residential street, it was inappropriate for the major access road to connect to it. Under the 1996 planning scheme, part of the Mount Pleasant subdivision land was zoned "Future Urban" and part was zoned "rural".  Residential subdivisions were prohibited in the rural zone.  Rezoning was needed.  In the "Future Urban" zone, residential subdivisions were discretionary.

2. The application was viewed unfavourably.  On 23 December 2004 a council officer wrote to the plaintiff's surveyor requesting further information.  He pointed out that the council had adopted a policy that subdivisions in the "Future Urban" zone would only be approved if the developer had submitted an "overall development plan for all continuous pieces in the zone", and that rezoning to residential had to take place before any subdivision was considered. 

3. On 14 June 2005 the council decided to grant a permit for a 31-lot subdivision, comprising the whole of the plaintiff's proposed stage 1 and part of its proposed stage 2. No rezoning had taken place, or even been sought.

4. The plaintiff appealed from that decision to the Resource Management and Planning Appeal Tribunal ("the RMPAT").  So did the new owner of the Mount Pleasant homestead, Mr de Moor.  On 13 September 2005 the Tribunal decided that the approved 31-lot subdivision was so different from the 58-lot subdivision originally proposed that the council had had no jurisdiction to grant the permit:  Page Seager obo Paul Jacques Marie de Moor v Launceston City Council and G J Walkem & Co Pty Ltd and RV Pty Ltd v Launceston City Council [2005] TASRMPAT 202. 

5. The plaintiff took the view that, since the council's decision had been a nullity, it had not made a decision in relation to the application of 20 October 2004 at all. In such a situation, s 59 of the Land Use Planning and Approvals Act 1993 ("the LUPA Act") deems the council to have made a decision to permit the proposed development, and allows the developer to institute an appeal to the Tribunal with a view to the Tribunal determining appropriate permit conditions. The plaintiff therefore lodged such an appeal on 14 September 2005. On the same day a council officer, as a delegate of the council, made a fresh decision refusing the development application on the ground of "Lack of traffic infrastructure to support density of development requested."

6. The Tribunal heard the appeal over four days in November 2005.  It appears that the grounds of appeal were amended so as to challenge the delegate's decision to refuse a permit.  On 8 December 2005 the Tribunal upheld that decision and dismissed the appeal:  D Armstrong obo G J Walkem & Co obo RV Pty Ltd v Launceston City Council [2005] TASRMPAT 284.

7. The Tribunal made it clear that it considered the proposed subdivision inappropriate because of matters relating to traffic and stormwater disposal. As to traffic, it noted that the plaintiff had applied for "a 57 lot subdivision, in the form of a cul-de-sac, and not one with through traffic".  It considered two alternatives – a 40-lot subdivision, and a subdivision with provision for through traffic via a roadway through the Connector Park land – but considered that each of those alternatives would create a substantially different subdivision that it had no jurisdiction to approve.

8. In relation to stormwater, it relied on the evidence of the council's manager of hydraulic modelling and systems, Mr S Ratcliffe, that "from a drainage and flood defence perspective no subdivision should be approved in a situation such as proposed unless carefully designed measures were put in place to mitigate the impact of increased runoff". 

The dispute over heritage register listing in 2006

1. Early in 2006 the Tasmanian Heritage Council made a decision to list part of the plaintiff's land on the Tasmanian Heritage Register pursuant to the Historic Cultural Heritage Act 1995. The area in question was adjacent to the homestead property owned by Mr de Moor. That listing would have substantially impeded the subdivision of the plaintiff's land. The plaintiff appealed to the RMPAT. On 31 August 2006 the Tribunal made a decision in the plaintiff's favour: S McElwaine obo RV Pty Ltd v Tasmanian Heritage Council [2006] TASRMPAT 177. The effect of the Tribunal's decision was that the area affected by the Heritage Register listing was substantially reduced.

The development application of 31 October 2006

1. By October 2006 the subdivision of the parcel of land adjacent to Ernest Street had proceeded. The new road connecting to Ernest Street had been named Southgate Drive. On 31 October 2006 the plaintiff's surveyors applied to the council for planning permission for four lots of that subdivision to be re-subdivided to create eight lots. 

2. A director of the defendant company, Joe Pintarich, made a representation opposing the application. A council planning officer recommended that the application be approved. On 18 December 2006, the council unanimously decided to refuse the application, stating the following grounds:

   "1Approval of this subdivision would otherwise prejudice the future development of the Future Urban Land. There are no developments [sic] requirements that establish a desired character to allow for the co-ordinated development of the land. 

   2The subdivision is out of character with the surrounding development and streetscape.

   3The proposal is premature pending the completion of an outline development plan for the area."

3. The plaintiff appealed unsuccessfully to the RMPAT: RV Pty Ltd v Launceston City Council [2007] TASRMPAT 105.  In that decision at [30] the Tribunal expressed the view that "the proposal intensifies density in a way which is not appropriate". I regard that decision as insignificant.  It related only to the density of development in a small part of Stage 1.

The defendant's development application of 24 July 2007

1. As I have said, the defendant had obtained a permit for a subdivision of its Connector Park land in December 1998.  That permit was subsequently amended on a number of occasions.  By an amendment dated 4 October 2004, the construction of the roadways linking the plaintiff's land to the Kings Park Connector was brought forward to Stage 2 of the subdivision.  That construction had originally formed part of the final stage.  By July 2007, six of the 17 lots in the subdivision had been developed. On 24 July 2007 the defendant applied for a fresh permit for the subdivision of the balance of the Connector Park land, with new proposals as to lot sizes, road alignments, and the staging of the development.  The defendant proposed that some sections of the Connector Park land were to be the subject of future applications, and not developed at that stage.  One of those sections included the original lot 108, which was the northernmost section of the proposed roadway that would provide access to the plaintiff's land.  That is to say, having obtained a permit amendment in October 2004 to bring forward the construction of the roadway over lot 108, the defendant sought a new permit in July 2007 that involved deferring the construction of that section of the roadway indefinitely. The plaintiff made a representation to the council opposing that course.

2. On 24 September 2007 the council decided to grant the permit application, but to impose a condition relating to road access to the plaintiff's land. The condition required the defendant, prior to the commencement of development, to enter into an agreement with the council under s 71 of the LUPA Act to the following effect:

   "The land shown as Future Road Access to the land known as 23 Southgate Drive (Volume 143548 Folio 1) [the plaintiff's land] must be created as a separate lot. It must be transferred to Council at such time as development on the adjoining property is approved. Once transferred, the Launceston City Council must hold that lot as a reserve for future road construction by any person who wishes to carry out a development or use which requires the construction of a road over it or a portion of it.

   Such person must construct that lot or portion of it as a road (together with such other necessary infrastructure works) in accordance with the standards of construction applicable to the development or use applied for, the Launceston City Council as owner must consent to the making of any application for development or use which requires the construction of a road over that lot or any portion of it … and must give such other future consents in its capacity as owner as may be reasonably necessary to give effect to that consent.  This permit does not require the Launceston City Council to construct the Future Access Road as a road."

3. The plaintiff appealed to the RMPAT. A mediation took place.  It was successful.  The parties sought and obtained a consent decision from the Tribunal. Amongst other things, that decision provided for the insertion of the following provision into the permit conditions:

   "Road Lot 108 shall be constructed before the plan of subdivision is sealed.  Such road shall be completed with a minimum 9.0m wide 2 coat seal and the matters set out in Clause 8 'Subdivision – Audit & Construction Guidelines' shall be completed to the satisfaction of the Manager, Transportation and Development."

4. That consent decision was dated 7 April 2008.  On the same day, the council issued an amended permit incorporating the provision as to the construction of the road over lot 108.  No permit had previously authorised the construction of a road over that lot. 

The order for specific performance

1. It was about 10 weeks later, on 17 June 2008, that Tennent J made the consent order that, by way of specific performance, required the defendant to construct the roadway as required by the contract of 26 August 2004.

The construction of the roadway

1. The construction of the roadway was completed on 28 June 2008.  Clause 5.6 of the contract required construction to be completed by 6 January 2005.  There had been a delay of a little under 3½ years.

The development application of 29 June 2009

1. On 29 June 2009 the plaintiff submitted an application for a permit for a four-stage 80-lot subdivision of part of its land.  The application was thoroughly prepared and documented.  It was accompanied by hundreds of pages of reports and plans.  On 14 August 2009 the council decided to grant the application.  The permit was issued on 27 August 2009. 

2. Mr de Moor appealed to the RMPAT, but he subsequently withdrew that appeal. 

3. The problem relating to stormwater was dealt with in the June 2009 application.  The plaintiff proposed that provision be made for a detention basin where, after heavy rain, run-off could be temporarily stored and slowly released.  That solution was acceptable to the council.

4. There were subsequent subdivision applications resulting in the granting of permits as the plaintiff gradually developed its land and sold off residential lots.  There is no need for me to go into any detail about those subsequent applications.

Consequences of the breach of contract

1. In my view it is clear that, from the time the parties made their contract on 26 August 2004, the plaintiff was making repeated and reasonable efforts to proceed with the Mount Pleasant subdivision beyond Stage 1.  It applied for a permit for a 58-lot subdivision in October 2004.  When it got a permit for only 31 lots, it appealed. When the original decision was held to be a nullity, it promptly sought to take advantage of its legal right to proceed with a 58-lot subdivision. It instituted and prosecuted an RMPAT appeal in 2006 in order to get a substantial reduction in the amount of its land that was affected by the listing in the Heritage Register. It made a representation to the council opposing the defendant's attempt in July 2007 to defer the construction of the roadway indefinitely.  It appealed in relation to the council's subsequent decision, and obtained a favourable consent decision from the RMPAT in April 2008.

2. The plaintiff is a member of a group of companies known as the JAC group.  Companies in that group and the individuals that manage them had substantial experience in large-scale residential subdivisions.  At all material times the plaintiff and the group had the resources necessary to undertake the subdivision of the plaintiff's land.  The profits that could be made from such a subdivision provided a powerful incentive for the plaintiff to proceed.

3. Having regard to those matters, I am satisfied that, if the defendant had completed the construction of the Connector Park roadway in accordance with the contract by 6 January 2005, then the plaintiff would thereafter have applied to subdivide the Mount Pleasant land for residential purposes, in stages, relying on the availability of the Connector Park roadway as a public highway.

4. Further, I am satisfied that, but for the defendant's breaches of contract, there was a very substantial prospect that the plaintiff would have acquired the benefit of subdivision approvals from the council years earlier than it did.  Plainly a planning permit for such a residential subdivision is of substantial commercial value.  It follows that the breaches of contract caused the loss of a commercial opportunity that had a substantial value.  It is true that the plaintiff would have needed to satisfy the council as to various matters, including stormwater issues, heritage issues, visual impact issues, demand issues, and issues as to orderly planning.  For the reasons that follow, I consider that, if the Connector Park roadway had been constructed when the contract required it to be, the plaintiff's chances of satisfying the council in relation to each of those issues would have been very strong.

Stormwater issues

1. The Mount Pleasant land is in the catchment area of the Kings Meadows Rivulet.  Before stormwater from that land reaches the rivulet, it passes through the Kings Meadows commercial district in a system of pipes.  That district is prone to flooding.  The establishment of residential subdivisions results in flows of increased volumes of stormwater, and in increased rates of flow.  It was therefore necessary for the plaintiff and the council to address the risk of more frequent and deeper flooding of areas downstream from the plaintiff's land. 

2. A solution to this problem was found before the plaintiff lodged its development application of 29 June 2009. The plaintiff proposed the establishment of a detention basin on an area of vacant land and the use of a technique referred to as "extended detention".  A stormwater drainage system was designed so that, following heavy rain, a substantial quantity of run-off would be retained off-stream for at least six hours, and then slowly released over a 24-hour period. The development application of 29 June 2009 included a proposal for the establishment of that detention basin.  Council officers considered the proposed stormwater arrangements to be appropriate.  The permit granted on 27 August 2009 did not contain a condition in relation to the detention basin.

3. The plaintiff subsequently engaged a former council officer, Mr Walters, to design the detention basin.  He had been employed by the council as a development engineer from November 1996 until February 2005, but had gone into private practice.  His design was approved of by council officers, and construction was completed in accordance with his design.

4. He gave evidence for the plaintiff.  In his opinion there was no reason why the construction of a detention basin might not have been identified and approved as an appropriate solution to the stormwater issue in 2005.  He opined that the likelihood of an appropriate stormwater system being designed, approved by the grant of a planning permit, and then constructed within the period from August 2004 to July 2005 was 100%.  Mr Walters' opinions were not shaken in cross-examination. 

5. A condition requiring the design and construction of a stormwater detention basin was included in the permit for a 31-lot subdivision granted by the council in June 2005.  Mr Walters drafted that condition before he left the council.

6. In its decision of 8 December 2005, the RMPAT was concerned that the proposed detention basin, whilst it might have been adequate to deal with run-off from the subdivision, might be inundated by floodwaters originating upstream from the plaintiff's land. At [46], the Tribunal concluded that it was inappropriate to view the proposed subdivision in isolation; that the potential for integration of the stormwater provision for the subdivision with other stormwater provisions existed; but that the manner of such integration was then "too uncertain to satisfy the Tribunal that adequate provision is reasonably likely".

7. At some stage the council undertook the redevelopment of an old dam on the Mount Pleasant homestead property, which became the primary detention basin for the relevant catchment area.  I am not sure whether that was before or after the council's decision of August 2009.  Mr Walters gave evidence, which I accept, that it would not have been reasonable for the council to have required the plaintiff, whose land comprised less than 8% of the relevant catchment area, to bear the full cost of a detention basin suitable for the entirety of the catchment.

8. Whenever the RMPAT hears and determines an appeal relating to a planning question, a number of relevant issues must be considered, and there must always be some risk that, because of a concern about a particular issue, the Tribunal will reach a decision adverse to the proponent of the proposed development.  Often much will depend on the quality of the evidence presented in relation to a particular issue.  In my view the conclusion reached by the Tribunal about stormwater issues in its decision of 8 December 2005 reflects the ever present risks associated with planning appeals, rather than any inadequacy in the arrangements then proposed by the plaintiff in relation to stormwater.

9. In the circumstances I am satisfied that, had the defendant not breached the contract, it would not have been likely that stormwater issues would have prevented or significantly delayed the obtaining of permits for the development of the plaintiff's Mount Pleasant subdivision.

Heritage and visual impact issues

1. The Mount Pleasant homestead was constructed in the 1860s. When entered on the Tasmanian Heritage Register, it was described as "a magnificent complex of Victorian Italianate buildings and associated features in a parkland setting approached through a densely planted avenue".  The grounds of the homestead building were described as containing a neo-classical chapel, an arbour, stone stables, other outbuildings, and a two storey brick cottage.

2. When the development application of 20 October 2004 was before the council, a representation was made to the effect that the proposed subdivision would have a deleterious effect on the public views of the Mount Pleasant property. Mount Pleasant had been provisionally listed by the Tasmanian Heritage Council, but that council gave an exemption in relation to the proposed subdivision. A council officer reported that the proposed subdivision was not considered to have a detrimental visual impact on the listed place. As I said at [37] above, Mr de Moor appealed to the RMPAT from the decision to grant a permit for a 31-lot subdivision. The Tribunal did not need to address the merits of the visual impact argument in its decision of 13 September 2005. However Mr de Moor was joined as a party to the appeal that was heard in November 2005. In its decision of 8 December 2005, the Tribunal considered the heritage and visual impact issues very carefully and concluded at [63] that the development then proposed would "not have a substantial impact on the heritage qualities of Mount Pleasant".

3. The heritage issues appear to have been finally resolved by the RMPAT's decision relating to Heritage Register listing in 2006, referred to at [42] above. The Tribunal redrew the boundary for the listed heritage place in such a way that the listed part of the plaintiff's land comprised a lake and a small amount of land within 20 metres of that lake. No subsequent representations about heritage issues appear to have been made by Mr de Moor or anybody else.

4. In the light of the conclusions reached by the RMPAT in its decisions of 8 December 2005 and 31 August 2006, I am satisfied that, had the defendant not breached the contract, there would not have been any significant chance that heritage or visual impact issues would have prevented or significantly delayed the obtaining of permits for the development of the plaintiff's land.  At worst, it might have been necessary for the plaintiff to have the boundaries of the listed place determined by the RMPAT in 2005.  There is no reason to think that the plaintiff might have obtained a less favourable result in 2005 than the one it actually obtained in 2006.  At worst, the need for the Tribunal to resolve such a dispute might have delayed the development of part of the plaintiff's land by a few months.

Demand issues

1. In its decision of 8 December 2005, the RMPAT concluded at [49] that it was not satisfied that there was sufficient demand to make a co-ordinated development of the land zoned "Future Urban" reasonably likely in the foreseeable future.  It based its conclusion on evidence that 10 of the 14 lots in Stage 1 of the subdivision had remained unsold for over a year at that stage.  With all due respect to the members of the Tribunal, I think it can be said that the evidence relied on in relation to that issue was very flimsy.  To evaluate demand for new residential lots, it would be necessary to consider trends in the Launceston area as a whole. 

2. By the time the plaintiff lodged its subdivision application of 29 June 2009, the council had undertaken a substantial amount of strategic planning in relation to the demand for residential lots.  According to the submission then made to the council, new residential lots were being created at the rate of 92 per year, but were being taken up at the rate of 150 per year. 

3. The plaintiff called two planners as expert witnesses – Mr Brownlie and Ms Duckett.  Both gave evidence to the effect that the council did not normally require developers to address demand issues in relation to proposed residential subdivisions. 

4. The defendant also called a planner, Mr Shephard, as an expert witness.  He pointed out that by 2009 the council had published a "Residential Strategy for Launceston" which ranked the plaintiff's land fourteenth in priority for development.  However under cross-examination he conceded that he was surprised that a number of areas given higher priority rankings were on the fringes of the Launceston urban area, unlike the plaintiff's land.  He conceded that the plaintiff's land was within a kilometre of schools, shops and parks, and that there were no factories, as distinct from commercial and light industrial sites, in the vicinity.  All of those matters suggest that, as from 2005, the demand for lots in a subdivision of the plaintiff's land was likely to be much greater than the ranking of fourteenth suggested.

5. In the light of the evidence regarding demand, I am satisfied that, had the defendant not breached the contract, it would have been extremely unlikely that demand issues would have prevented or significantly delayed the obtaining of permits for the development of the plaintiff's land. 

Issues as to orderly planning

1. In order for the plaintiff's subdivision to proceed, it was necessary for permits to be granted in respect of the land zoned "Future Urban", and for the land zoned "rural" to be rezoned.  The zoning was governed by the 1996 planning scheme.  A provision in that scheme indicated that land zoned "Future Urban" was intended to be developed 10 or more years after the commencement of the scheme.  The likelihood of the plaintiff obtaining the necessary permits and the necessary rezoning depended substantially on the demand for new residential lots in the King Meadows area, and on the strategic decisions of the council and the Resource Planning and Development Commission (as it then was).

2. After the Connector Park roadway had been constructed, the plaintiff had no difficulty obtaining planning permits for each stage of the subdivision in the area zoned "Future Urban".  There is no reason to think that factors relating to orderly planning might have brought about a different result if the roadway been completed in 2005. 

3. Despite the discouraging assertions as to the council's policy contained in the letter of 23 December 2004, the "Future Urban" zoning of the eastern part of the plaintiff's land did not result in the council deciding against all development in Stage 2 of the subdivision in June 2005.  It was the lack of road access through the defendant's Connector Park land that was the principal obstacle to development at that stage. 

4. The western part of the plaintiff's land ceased to be zoned "rural" as a result of the 1996 scheme being replaced by the Launceston Interim Planning Scheme 2012.  That interim scheme came into force on 17 October 2012.  Thereafter the plaintiff had no difficulty in obtaining permits for the subdivision of the land previously zoned "rural".  If the plaintiff had sought a rezoning before the commencement of the interim scheme, it may have been unsuccessful.  But that might have resulted in faster sales of lots in the eastern part of its land until the interim scheme came into force.  At worst, zoning difficulties might have delayed the sales of lots in the western part of the plaintiff's land.

The plaintiff's entitlement to damages

1. It is clear from the history of the plaintiff's dealings with the council and the appeals to the RMPAT that the only substantial obstacle to the granting of permits for the subdivision development after Stage 1 was the absence of a suitably constructed public road through the defendant's Connector Park land. If the construction and dedication of the Connector Park roadway had proceeded in accordance with the contract, there is a small chance that one or more of the factors discussed above might have resulted in delays in the development of the subdivision.  However it is clear that there was a very substantial prospect that the plaintiff would have acquired the benefit of subdivision approvals from the council with little or no delay.  The plaintiff is therefore entitled to damages for breach of contract in respect of the loss of the opportunity to develop its land for a residential subdivision earlier than was ultimately possible: Badenach v Calvert (above).  The risks associated with the stormwater, heritage, visual impact, demand and planning issues discussed above are matters that must be taken into account in quantifying the damages recoverable by the plaintiff.

Quantification of the plaintiff's damages

1. The development and sale of lots in Stage 1 of the Mount Pleasant subdivision, which was adjacent to Ernest Street, was not delayed by the defendant's breach of contract.  No lots were sold in any other stages until the 2011 financial year.  But in that year the plaintiff received sales revenue exceeding $2.3 million from the sale of lots in stages other than Stage 1.  Positive cashflows from the sale of lots outside Stage 1 commenced during that financial year, have continued ever since, and are likely to continue for years to come.

2. The plaintiff contends that, but for the defendant's breach of contract in failing to complete the construction of the Connector Park roadway, those positive cashflows would have commenced 3½ years earlier than they did.  On the basis of data relating to those cashflows, Mr Rands has expressed an opinion as to the extent of the loss suffered by the plaintiff as a result of delayed cashflows as at September 2014. 

3. Mr Rands was supplied with data compiled from the financial records of the plaintiff company by a Mr Blackwood.  Mr Blackwood is the finance manager of the JAC group of companies.  He has held that position for over 21 years. 

4. He provided Mr Rands with data as to the actual net cashflows relating to the Mount Pleasant subdivision, excluding Stage 1, up to 30 June 2013, as well as his predictions as to such net cashflows from 1 July 2013 until the sale of the last lots in the subdivision.  He predicted that the last lots would be sold in the 2028 financial year.

5. Mr Blackwood's calculations as to the actual cashflows up to 30 June 2013 were based on figures extracted from the JAC group's financial records as to the following:

   ·     Sales revenue for each stage of the Mount Pleasant subdivision for each financial year, excluding GST and rebates. (There was evidence that, whilst the plaintiff would never sell a lot for less than its asking price, it would sometimes agree to allow rebates to purchasers.  For example it would sometimes, by agreement, reimburse purchasers in respect of expenses such as landscaping costs, the cost of gas appliances, stamp duty, or legal costs.  Sometimes purchasers would be paid a rebate if they completed construction of a dwelling within an agreed time.) 

   ·     The selling expenses for each stage for each financial year.

   ·     The value of work in progress for each stage at the start of each financial year.

   ·     The amount of accumulated expenditure for each stage at the start of each financial year.

   ·     The proportion of the cost of land attributed to the lots sold in each stage in each financial year.

   ·     The proportion of development costs attributed to the lots sold in each stage in each financial year.

   ·     Costs incurred but not attributed to particular stages as at the end of each financial year.

   ·     The value of work in progress for the entire Mount Pleasant subdivision project at the end of each financial year.

6. Mr Blackwood's predictions in relation to 2014 and subsequent years were based on the following:

   ·     Actual sales and expenditure data for most of the 2014 financial year.  (He made his predictions in or about May or June 2014.) 

   ·     Estimates by him of the number of sales per year, based on his experience in relation to various other subdivision projects undertaken by members of the JAC group.  

   ·     An assumption that future sale prices would be equal to the average of pre-2014 sale prices, with no inflationary increase over time. 

   ·     An assumption that future expenses would accord with contractors' estimates, and not increase with inflation over time. 

   ·     An assumption that the plaintiff's profits would continue to be subject to a tax rate of 30%. 

1. When Mr Blackwood gave evidence in May 2016, about two years after compiling his predictions, the actual sales since 1 July 2013 had exceeded his estimates.

2. Mr Rands took Mr Blackwood's actual and predicted cashflow data for the stages other than Stage 1, and undertook calculations as follows:

   ·     Using Mr Blackwood's figures as a starting point, he calculated what the cashflows would have been if the sale of lots outside Stage 1, and the incurring of related expenditure, had commenced 3½ years earlier, and if all cashflows relating to the development and sale of lots outside Stage 1 had been brought forward by 3½ years.

   ·     He calculated the return that the plaintiff would have received from the investment of funds if the funds received by it from Mount Pleasant, excluding Stage 1, had been received 3½ years earlier.  That is to say, he compared his estimate of the investment income that would have been received with estimates of investment income based on Mr Blackwood's figures.

   ·     He took into account the interest that was paid by the plaintiff on borrowings for the project. 

   ·     He calculated the value of the lost investment opportunity as at September 2014 using three different earning rates – 6.2%, 6.6%, and 9%. 

   ·     He discounted the estimated value of the investment losses to allow for the time value of money and also the risk that the future cashflows would not occur as projected. He undertook calculations using two different discount rates – 22% and 30%. 

   ·     After applying those discounts, and making allowance for after tax interest, he grossed up his figures to allow for taxation.  He assumed a constant company tax rate of 30%.  He did this because any damages awarded to the plaintiff would be subject to tax.

3. Mr Rands' calculations produced six different estimates of the gross losses suffered by the plaintiff as a result of the defendant's breach of contract, as follows:

Illustrative Investment Return	Discount Rate	Loss Grossed up for Taxation
6.2%	22%	$ 2,424,685
6.2%	30%	$ 1,879,840
6.6%	22%	$ 2,461,869
6.6%	30%	$ 1,899,986
9.0%	22%	$ 2,710,776
9.0%	30%	$ 2,031,445

1. As one can see, depending on what percentages are adopted in respect of investment returns and discount rates, the plaintiff's gross losses were estimated at between $1,879,840 and $2,710,776.  Those figures are estimates of the plaintiff's losses as at September 2014.  In addition, the plaintiff is claiming damages in the nature of interest from September 2014 until judgment in accordance with the principles discussed by the High Court in Hungerfords v Walker (1989) 171 CLR 125.

2. An experienced chartered accountant named Matthew Wallace gave evidence for the defendant.  He criticised some aspects of the calculations undertaken by the plaintiff's witnesses.  However he agreed that discounted cashflow was a common methodology employed to calculate the present value of a future cashflow.  He accepted that cash received at an earlier point in time is more valuable than cash received at a later point in time; that such calculations had to take account of risk associated with the cashflow stream; that that risk was reflected in the discount rate used to convert future cashflows into a present value; and that the use of such a methodology was widespread in relation to projects with a finite life, such as subdivisions.  He accepted that one has to make a projection in undertaking a discounted cashflow analysis for a subdivision, and that that projection was a matter of professional judgment.

3. The "net present value" approach has been considered to be an appropriate method for assessing damages to compensate for lost cashflows that would have been received in a number of cases concerning lost commercial opportunities: IOOF Building Society Pty Ltd v Foxeden Pty Ltd [2009] VSCA 138, 23 VR 536; Hart Security Australia Pty Ltd v Boucousis [2014] NSWSC 1654, 102 ACSR 557; North East Solution Pty Ltd v Masters Home Improvement Australia Pty Ltd [2016] VSC 1.

4. Most of Mr Wallace's evidence was set out in a report by him dated 7 May 2016.  I held most of the report to be inadmissible, but the admissible parts dealt with four topics which I will now address.  Mr Wallace is the managing partner of the Hobart office of KPMG.  His report contained a standard form of disclaimer which said, amongst other things, that the report was "not intended to influence a person in making a decision".  It was tendered precisely for the purpose of influencing me in making a decision, and I will therefore ignore the disclaimer. 

5. Mr Wallace compared the sales price data relied upon by Mr Rands for 83 lots with sales price data provided in the reports of the plaintiff's valuers, Mr Cubbins and Mr Pitt.  He calculated that on average the sale prices were 9.07% above the figures relied on by Mr Rands.  He noted that Mr Rands' calculations assumed that the sale prices would have been the same if the lots had sold 3½ years earlier.  He suggested that the appropriate approach was to assume that the sale prices would have been 9.07% lower if sales had occurred 3½ years earlier.  However Mr Wallace was not aware that the plaintiff had allowed rebates to some purchasers, as mentioned above.  Mr Rands used figures provided by Mr Blackwood that took those rebates into account.  Mr Cubbins and Mr Pitt had information as to the pre-rebate sales prices.  The evidence does not suggest any other reason for the discrepancies between the two sets of figures. It was appropriate for Mr Rands to rely on Mr Blackwood's figures, rather than the pre-rebate sale prices.

6. Mr Wallace observed that as at 30 June 2013 there were eight lots in Stage 2A-4 of the subdivision that remained unsold, but that Mr Blackwood's spreadsheet showed that there were 10 lots in that stage that remained unsold. However any adjustment of Mr Rands' calculations to take account of such a discrepancy could only benefit the plaintiff.  Mr Blackwood took a conservative approach in the assumptions that he made as to the rates of future sales.  A dollar received in 2013 is worth more to a developer than a dollar received in 2014.  It follows that a delay in the development of a fast-selling subdivision should result in a greater award of damages than a delay in the development of a slow-selling subdivision.

7. Mr Wallace observed that the plaintiff company made a loss of $6,307 in the 2010 tax year; that it would therefore have been entitled to claim a tax deduction in that sum the following year; and that Mr Rands had failed to take the availability of that deduction into account.  That was correct.  The estimate of tax payable for 2011 was therefore overstated by $1,892, that being 30% of $6,307.  It follows that Mr Rands' final figures for losses as at September 2014 were overstated.  Doing the best I can, I estimate the extent of that overstatement to have been in the vicinity of $2,500.  I regard that as insignificant, having regard to the size and imprecision of the plaintiff's claim.

8. Mr Wallace observed that Mr Rands' calculations were based on estimated financial information for 2014 and 2015, and that the actual information for those years would have been available at the time of trial.  He opined that the cashflow report should be updated to reflect the actual information for those years.  However, whilst such an updating would no doubt have resulted in figures that were slightly more reliable, the evidence does not establish whether such an updating would have benefited the defendant or the plaintiff. 

9. No other opinions were expressed by Mr Wallace in the admissible parts of his report.  That does not reflect badly on Mr Wallace. The defendant changed solicitors not long before the trial.  The circumstances in which Mr Wallace was engaged and briefed prevented him from undertaking a more thorough and more timely investigation of the information and calculations relied upon by the plaintiff.

10. Mr Blackwood was thorough and meticulous in his calculations, and conservative in his assumptions.  I accept that his methodology was appropriate.  It is true that he made no allowance for real estate prices increasing with inflation, but sale prices are only one component in a very complex calculation.  Construction costs might also increase with inflation, but Mr Blackwood made no assumption that they would. Rather than looking at trends in relation to real estate prices or construction costs in isolation, it would be more appropriate to consider what trends there were as to the margins between sale prices and expenses, but I have not been presented with any evidence as to such margins, and will therefore have to assess damages as best I can.

11. As I have said, Mr Rands calculated six different estimates of the plaintiff's loss as at September 2014, using three different earnings rates and two different discount rates.  His evidence as to the three different earnings rates was to the following effect:

    ·     The lowest figure, 6.2%, came from the Australian Stock Exchange 2014 Long-term Investing Report as the annual percentage return, before tax, on Australian fixed interest investments over the 10 years ending in December 2013. 

    ·     The middle figure, 6.6%, represented the rate of return on an investment made by the plaintiff in 2003, according to information provided to Mr Rands.

    ·     The upper figure, 9.2%, came from the same Australian Stock Exchange report.  It represented the annual gross return on investments in Australian shares for the 10 years to December 2013.

12. Counsel for the plaintiff submitted that the assumptions that underlay Mr Rands' opinion were very conservative, and likely to result in a significant underestimate of the plaintiff's actual financial loss.  I took him to be suggesting that the adoption of the lower figures of 6.2% and 6.6% would not do justice to the plaintiff.

13. Mr Rands gave evidence that his discount percentages of 22% and 30% represented the upper and lower limits of the range of appropriate discount percentages, having regard to all the circumstances. Those circumstances include the risks of permits being refused or delays being encountered because of issues relating to stormwater, heritage, visual impact and so forth. Mr Rands said that an appropriate discount for a risk-free investment would be 2.8%, and that premiums for various risks would have to be added to that figure.  He did not undertake a precise calculation, adding different percentages for different components. His final percentages were the product of what I would call an intuitive synthesis. He was unshaken as to the appropriateness of the earnings rates and discount rates used in his calculations, and not contradicted by Mr Wallace. 

14. I accept that the assumptions made by Mr Blackwood and Mr Rands were so conservative that the strict adoption of an earnings rate of 6.2% or 6.6% would not do justice to the plaintiff. Doing the best I can, I think it would be appropriate to adopt an earnings rate nearer to 9% than 6.6%, and to adopt a discount rate more or less half way between 22% and 30%. Having regard to the figures set out at [91] above, I am satisfied that a payment of $2.2 million in September 2014 would have been appropriate to compensate the plaintiff for its lost commercial opportunity.

15. The plaintiff is entitled to damages in the nature of interest in respect of the period from September 2014 until judgment in accordance with the principles discussed by the High Court in Hungerfords v Walker (above).  A bank statement tendered in evidence shows that the plaintiff had an overdraft of over $3 million as at 3 February 2014, and that the interest rate applicable to that overdraft was then 5.65%.  I do not have any more recent information as to its indebtedness or the applicable interest rate. I am satisfied that if the plaintiff had received $2.2 million in September 2014 it would have reduced its overdraft and/or made investments that would have yielded returns in the vicinity of 5.65% per annum. It is now 31 months since September 2014.  If the defendant were required to pay 31 months' simple interest on $2.2 million at 5.65% per annum, I calculate that the amount payable would be $321,108.  I have decided to round that down to $320,000.  The plaintiff should therefore have judgment for $2.52 million on its claim.

Conclusion

1. For the reasons stated, there will be judgment for the plaintiff against the defendant for $2,520,000 on the claim, and for the defendant against the plaintiff for $440,000 on the counterclaim.