Berrivale Orchards Ltd v Blakes [1995] QSC 220

( SC qs-/2Zo ' ' /I ' IN THE SUPREME COURT OF QUEENSLAND No. 194 of 1991 Brisbane Before the Hon. Justice White [Berrivale Orchards Ltd v. Blakes] BETWEEN: BERRIVALE ORCHARDS LIMITED Plaintiff AND: BLAKES (a firm) Defendant REASONS FOR JUDGMENT - WHITE J Judgment delivered: 4 September 1995 CATCHWORDS: Counsel: Solicitors: Negligence of solicitor - conveyance - failure to obtain Minister's consent termination by purchaser - causation loss of commercial chance. Mr R Douglas QC and with him Mr M Daubney for the plaintiff Mr P Morrison QC and with him Mr S Doyle for the defendant Michell, Sillar, Nicholson for the plaintiff Feez Ruthning for the defendant Hearing Dates: 7 1 8 9 and 10 August 1995 -- 1 of 49 -- ( IN THE SUPREME COURT OF QUEENSLAND BETWEEN: BERRIVALE ORCHARDS LIMITED AND: BLAKES (a firm) REASONS FOR JUDGMENT - WHITE J No. 194 of 1991 Plaintiff Defendant , Judgment delivered 4 September 1995 \ The plaintiff ( "Berri vale" - formerly Berri Fruit Juices Co-Operative Limited), had been the lessee of Crown land at Carole Park, an industrial estate near Brisbane, since 1982. In 1988 it was desirous of selling that land. By an agreement in (/ writing bearing date 3 February 1989 Berri vale agreed to sell its interest in the land to Goldwood Holdings Pty Ltd ("Goldwood") \_ / for the sum of $1. 79 million. The sale was subject to the purchaser obtaining Foreign Investment Review Board ( "FIRB") consent ( in the end FIRB consent was unnecessary because Goldwood was a Queensland company) and the consent of the Minister of Lands pursuant to s. 286 of the Land Act 1962. Completion date was 22 March 1989. Berrivale retained the defendant firm of solicitors ("Blakes") to act on the conveyance. On 20 March Goldwood sought an extension of time to 21 April 1989 to complete the contract. The consent of the Minister to the transfer of the lease to Goldwood had not then been obtained. Berrivale alleges -- 2 of 49 -- 2 that it was not informed of this by Blakes who stood by and allowed Berrivale to impose commercially unwise conditions upon Goldwood as the price of the extension. When Goldwood learned of the lack of ministerial consent on the due date for settlement of the contract it terminated the contract on the extended date (the next day) and obtained the return of the deposit moneys of $10,000, without deduction, as it was entitled to do under the contract. ' . Berri vale has sued Blakes for damages for breach of its ( : contract of retainer or in negligence in respect of its conduct of the conveyance. The loss is quantified as the difference between the sum which would have been received pursuant to the subject contract and what was actually received from the subsequent sale of the land and the costs "thrown away" on the lost transaction and interest. The Issues There are three aspects of the action which require determination. The first is whether Blakes breached the duty of care which it owed to Berri vale in acting on the conveyance. (_/' Blakes does not deny that it owed a duty to Berrivale to exercise C/ reasonable care when acting on the conveyance. It asserts a positive case, namely, that through its partner, Mr Roger Short, it alerted Berrivale that there would be no ministerial consent in time for settlement and, notwithstanding its delicate position, that Berrivale through Mr Scott, its Queensland representative, insisted on onerous terms as the price for an extension of time to settle. The resolution of this aspect of the action is largely a matter of resolving conflicting evidence. -- 3 of 49 -- ( ( 3 The second matter concerns causation. Blakes argues that even if it is found to have been negligent with respect to its conduct of the retainer, that negligence was not causative of any loss to Berrivale because it could not be demonstrated that but for the negligence of Blakes Goldwood would not have been entitled to terminate the contract without penalty. This is said to be so because it was unlikely that the Minister would have consented to Goldwood becoming the lessee of the land by the due date for settlement because of the uncertain nature of the venture which was proposed to be carried out on the land. The third issue is the assessment of Berrivale's damages. Blakes argues that even if its negligent conduct was causative of some loss, Berrivale has been unable to show that the contract with Goldwood would have settled. Blakes points to the unlikelihood that the Minister's consent would have been forthcoming and even if it were that it was unlikely that Goldwood would have completed the contract. Further since it was a company without assets there would have been no source of funds from which Berrivale could satisfy any judgment for specific performance and/or damages which may have been obtained. Background Berrivale, a South Australian company, carried on part of its business in Queensland as a fruit-juice processor at premises on the land at Carole Park. It was desirous of moving that operation to other of its premises in Brisbane and selling the lease and improvements. Mr Peter Scott, an industrial chemist, was the Queensland manager for Berrivale. He was not a director of the company and was not autonomous within Queensland but -- 4 of 49 -- 4 received his instructions from head office in South Australia usually from Mr M Nicolai, a director of Berri vale who was responsible for finance and legal matters, or from Mr P Wood, the managing director of Berrivale and head of the operations side of the business. On occasions he might receive instructions from Mr Wait the then company secretary. In 1988 he had been instructed by head office to find a selling agent for the Carole Park land and to retain solicitors for the conveyance. In about November 1988 the agent introduced a purchaser, D.F.M. Mainland Nominees Ltd, a New Zealand company and Blakes, the retained -c-·- ·; ' ,, ( solicitors, drew up a contract in early December using the REIQ standard form for leasehold land with special conditions. The (J special conditions were, inter alia, that an initial deposit of $10,000 be paid with a further $90,000 to be paid on early possession of the land, and FIRB approval. The purchase price was $1. 79 million. At some stage the purchaser's name was changed from D.F.M. Mainland Nominees Ltd to Rivenhall Limited or Nominee. That contract never came to fruition. Period 28 February to 23 March 1989 cj On 28 February 1989 Mr Roger Short, a partner at Blakes, (j received a copy of an executed contract - indeed the same contract which he had drawn in December 1988 - in which the earlier purchasers' names were crossed out and "Goldwood Holdings Pty Ltd" inserted. It was dated 3 February 1989. The name of the vendor had been changed from Berri Fruit-Juices Co-operative Limited to Berrivale Orchards Limited. The special conditions were the same including the requirement for FIRB approval, although the purchasing company's address was now at Southport, -- 5 of 49 -- 5 D.F. Mainland's address being shown as in New Zealand and the nominated solicitors had changed from a New Zealand firm to Elliotts. The date for completion was 22 March 1989. The standard form clause, clause 16, concerning ministerial consent was as follows: "Consents. Where by any statute any consent is required to this sale or the performance of any obligation under this contract the sale shall be subject to such consent being given and each party as may be necessary shall apply for such consent and shall pursue such application. The Vendor shall pay all costs and fees (other than those of the Purchaser or the Purchaser's solicitor) in respect of the application for consent. If such consent is refused or not granted by the date for completion then either party may by notice in writing to the other terminate this contract whereupon the deposit and other moneys paid hereunder shall be refunded to the Purchaser by the Vendor or the Stakeholder as the case may be without any deduction whatsoever." Mr Short had experience in construction law. He had been admitted to practice in New South Wales in 1976 and spent some time working with the construction industry initially in Queensland with Thiess Holdings Limited, then for CSR after it acquired the Thiess business. In 1981 he established his own legal practice, it would seem to service the Thiess' legal requirements. Within a year he merged that practice with Henderson Lahey and became a partner in that firm. In about 1987 he joined Blakes. Mr Short was familiar with the need to obtain ministerial consent before Crown leasehold land could be transferred. He accepted that when he received the executed contract on 28 February 1989 he was retained by Berrivale to facilitate the settlement of the contract by the due date. He also accepted that it was the normal practice for the vendor's solicitor to seek to obtain ministerial consent for the transfer -- 6 of 49 -- 6 in such circumstances and would normally seek the co-operation of the purchaser if information was required by the Department of Lands in respect of this matter. Indeed s. 286 of the Land Act 1962 requires that the application to transfer be by the lessee. Mr Short was aware that in an ordinary case such approval took between two and three weeks. When he received the contract, Mr Short telephoned Elliotts. He was told by Mr Elliot that his firm had no instructions from the purchaser and had not received the purchaser's copy of the contract. On that day Mr Short wrote to Mr Scott at Berrivale's office at Carole Park as follows: "Sale to Goldwood Holdings Pty Limited Please find enclosed copies of both agreements dated 3rd February 1989. You will note the inconsistency which now appears in Special Condition 8 of the Agreement for the sale of equipment. We have asked for confirmation that this can be amended to the name of the Purchaser. We note your advice that the deposit payable Contract has been paid, and accordingly will further advice from the Purchaser as satisfaction of Special Condition 32. under the now await to the Maxine Whelan from this office will now be handling this matter through to completion." The reference to both agreements was to the land contract and a contract for the sale of equipment at the premises which remained in the name of an earlier purchaser and which was dependant upon the land contract. Special condition 32 referred to FIRB approval. The letter made no reference to the need to apply for ministerial consent or the time constraints in getting the approval or that the purchaser's solicitors had no instructions and that information would be required about the purchaser before a sensible application for consent could be made. Mr Short wrote () -- 7 of 49 -- 7 to Elliotts on the same day seeking confirmation that an application for FIRB approval had been lodged and asked to be kept informed of the progress of that application "in due course". There was a reference to the purchaser's name on the equipment contract. There was no request for information needed for the application for the Minister's consent to the transfer of the lease or indeed any reference to it. It appears from notes on the file that between 1 and 8 March ( Mr Short's secretary was engaged in attempting to track down the purchaser's copy of the contract from Elliotts, the real estate agent or Mr Scott but otherwise nothing was done within Blakes to advance the conveyance until 15 March 1989. Mr Short agreed that some time prior to that date he handed the file to Jill Petrie, a newly admitted solicitor who had just joined the firm, in his section. Mr Short and Ms Petrie's evidence as to what u occurred thereafter differs in some respects. It will be necessary to refer to their accounts in some detail, but I should say at the outset that where they differed I preferred Ms Petrie's evidence, indeed her evidence was not challenged by counsel for Blakes in cross-examination. She kept diary notes of her involvement with the file and was able to refresh her memory from them. Al though she admitted to having little recollection of details other than what appeared in those notes she gave her evidence in a straight-forward and disinterested fashion and was careful not to elaborate further than she could recall. Mr Short was, I thought, rather anxious to distance himself from any responsibility for what occurred or did not occur in his section at Blakes and to attribute blame for lack -- 8 of 49 -- 8 of action, if blame were to be attributed, to Maxine Whelan a senior associate in his section and/or Ms Petrie. He gave the impression of structuring his oral evidence to fit within the contemporaneous documentary evidence. Mr Short's practice was not to keep diary notes or make notes for the file of telephone or other conversations with clients or to record internal instructions, nor generally to follow up any oral instructions from the client with written confirmation to the client. His practice was to note in his own diary the time spent on a matter (; for billing purposes. That note may have extended to the nature of the advice or some detail, but generally was confined to the time spent on the matter. Mr Short's diaries for the relevant period have not been able to be found despite searches at Blakes and at his home. They were not mentioned in his affidavit of discovery. As a matter of practice I have found Mr Short's conduct in failing to make contemporaneous notes of some kind to record his dealing with clients somewhat surprising for a professional man. However, in the circumstances of this case C) cj where he received what could only be regarded as commercially unwise, if not extraordinary, instructions which he alleged he l~ received orally from Mr Scott, to which I shall return, the failure to confirm them in writing to the client or by way of a file memorandum has exposed the defendant to adverse conclusions. The observations of Denning LJ (dissenting)in Griffith v. Evans [1953] 2 All E.R. 1364 may sound an appropriate warning although confined in that case to the question of the extent of the retainer: "On this question of retainer, I would observe that where there is a difference between a solicitor and -- 9 of 49 -- 9 his client on it, the courts have said for the last hundred years or more that the word of the client is to be preferred to the word of the solicitor, or, at any rate, more weight is to be given to it: see Crossley v. Crowther per Sir George J Turner, V.-C.; Re Paine per Warrington J. The reason is plain. It is because the client is ignorant and the solicitor is, or should be, learned. If the solicitor does not take the precaution of getting a written retainer, he has only himself to thank for being at variance with his client over it and must take the consequences." Ms Petrie was admitted to practice as a solicitor on 20 February 1989. A week later she commenced employment with ( Blakes. A few days before the 15 March she said that Mr Short gave her the Carole Park conveyancing file, asked her to look at it and then to see him. No urgency was mentioned. Mr Short's ( ( evidence suggested that he gave the file much earlier in the month to Ms Petrie. On 15 March Ms Petrie read the file. She noted that whilst work had been done in negotiating the contract in December 1988 nothing appeared on the file as having been done in respect of the conveyance. She had previously been involved in one if not two conveyances requiring the consent of the Minister of Lands to a transfer of a Crown lease and noted that no step had been taken to obtain that consent in this case. On "-- that day she telephoned the Lands Department and ascertained that a letter of application needed to be sent together with a fee and was told that in an ordinary case the process took "a couple of weeks". Ms Petrie recalls speaking to Mr Short that day expressing her concern about the consent. Mr Short's recollection was that Ms Whelan called him into her office in the middle of March noting that the application for consent had not been made and he said that he was very annoyed about the failure to attend to it and directed Ms Whelan and Ms Petrie to contact -- 10 of 49 -- 10 DID (Department of Industrial Development) and the LAC (Land Administration Commission) immediately. His recollection seemed to be based on the hierarchical system which operated at Blakes rather than a recollection of what actually occurred. Ms Petrie said that, apart from some minor matters, Ms Whelan had little contact with the file and that was why she dealt with Mr Short directly. Mr Short agreed that it was Ms Whelan's practice to make file notes and little appears in her hand on the file. Ms Whelan did not give evidence. Mr Short's evidence suggests a reconstruction since it was only after a letter from the LAC received on 21 March that there was any intimation that the C) (-~---\ Department of Industrial Development ("DID") was to be involved _ in the consent process. I have concluded that the initiative to do something about obtaining consent emanated from Ms Petrie. Ms Petrie telephoned Mr Radich, a solicitor at Elliotts, on 15 March since nothing had come from his firm which would be expected from a purchaser's solicitor on a conveyance. Mr Radich told her that he was having difficulty getting instructions and when she raised the question of FIRB approval she learnt that Goldwood was a Queensland company so that approval would be unnecessary. In a further telephone conversation with Radich on that day Ms Petrie inquired as to whether his firm had applied for LAC consent and was told that Elliott's had not and there was nothing on the file but that the client was coming in that afternoon. As a result of that conversation, Ms Petrie prepared a letter to the secretary LAC requesting the consent of the Minister to the transfer to Goldwood, noting that since the consent was required prior to settlement and that settlement was -- 11 of 49 -- 11 on 22 March, the application needed to be processed urgently. The letter was signed by Mr Short as a partner as was the practice at Blakes and hand delivered to the LAC. Ms Petrie telephoned Mr Scott at Berrivale and informed him of the result of her conversation with Elliotts, namely, that that firm was having difficulty getting instructions, that FIRB was no longer necessary, that Elliotts was aware that settlement was on 22 March, and that settlement figures would be arranged. No ( mention was made that the Minister's consent had not been obtained. ( On 17 March it is likely that Mr Radich rang Blakes and on behalf of Goldwood requested an extension of time to settle the contract until 21 April 1989. Ms Petrie spoke to Mr Short and to Mr Scott. She is now unable to recall precisely what was discussed or the sequence of conversations. She believes that Mr Short may have conveyed Mr Scott's instructions to her that there could be an extension but only on terms. It is necessary at this stage to say something about Mr Peter Scott. He was the only person from Berrivale prior to 23 March (which became the extended date for settlement) with whom Blakes had any contact. He was called to give evidence in Berrivale's case. He had resigned from Berrivale in 1990. When he gave evidence he indicated that he recalled very little about the conveyance aspects of the subject transaction. Most of his responses were that he did not recall one way or the other when propositions important to the outcome of the action were put to him. On the other hand he did respond positively to some questions and I concluded that he was particularly meticulous to -- 12 of 49 -- 12 answer only those questions in that fashion where he had a clear recollection. Where he was able to give positive answers I accepted his evidence. He was shown a document, apparently unsigned, which Mr Douglas QC for Berrivale sought to have him accept as his statement. Although Mr Scott identified some pencilled additions to the document as in his own handwriting he declined to accept the document as otherwise reflecting his account of what had occurred in March 1989 as he said that he could no longer recall if he accepted the accuracy of the document at the time when he made the writing on it. It did not become evidence in the action. Although Mr Scott had been invited by Berri vale's solicitors to refresh his memory with respect to the matters about which he was to give evidence on two occasions in the past, it appears that if he attempted to do so it was unsuccessful. He recalled that he knew that it was necessary to get the consent of the Minister for the transfer of the land and that there was some discussion about a request for an extension of time by the purchaser. As to the terms for the extension, Mr Scott said that he could not recall if he obtained those instructions from Berrivale's head office or whether head office handled the matter directly. The uncontradicted evidence was that head office did not deal directly with Blakes and accordingly the instructions must have been channelled through Mr Scott. This evidence is of some importance because it shows that Mr Scott was taking his instructions from head office in respect of the contract and not making those decisions for himself. He certainly was quite clear in his evidence that he had no authority to sign contracts or to bind Berri vale in C) -- 13 of 49 -- 13 respect of decisions relating to the contract without first obtaining instructions from head office. He said his practice on the conveyance was to refer matters requiring a head office decision to Mr Nicolai, Mr Wood or the company secretary, Mr Wait and the response would be directed to the solicitor, the other party, or through him. Those communications could be in writing or by telephone. There are no writings evidencing any communications between Mr Scott and head office or head office (~ and Mr Scott or indeed head office and Blakes or Elliotts. Mr Nicolai and Mr Wood said that they knew only of the request for an extension of time through Mr Scott and had given him his ( instructions with respect to the conditions to be imposed, namely, that the amount of the deposit was to be brought up to 10 percent of the purchase price and default interest at 18 percent per annum was to be charged from 22 March to the extended date for settlement. They had not been informed by Mr Scott or anyone else that the Minister's consent had not been obtained and was unlikely to be obtained prior to 22 March. Blakes does not suggest that they were in receipt of that knowledge. Mr Nicolai ~-' and Mr Wood said that had they been made aware of the delicacy of Berrivale's position, that is, that without Ministerial approval having been obtained by settlement day on 22 March it could not hold Goldwood to the contract or forfeit the deposit, they would have granted an extension of time as requested. Ms Petrie said that Mr Scott mentioned to her that he did not regard the purchaser to be bona fide and that he had doubts about the matter settling. Mr Nicolai and Mr Woods said that no concerns with respect to either of these matters were conveyed -- 14 of 49 -- 14 to Mr Scott. Whatever private concerns which Mr Scott may have expressed to Blakes does not compel the conclusion that the chain of command did not operate as was submitted by Blakes. Mr Short said that he had several conversations with Mr Scott in which Mr Scott queried the bona fides of the purchaser suggesting, in effect, that the contract was a sham transaction promoted by a competitor of Berri vale to tie up Berrivale's land and this was confirmed by the small deposit of $10,000. Mr Scott recalled some mention of the financial position of Goldwood being made from head office after the contract was signed. Mr Wood and Mr Nicolai said that they had n - _,/ no understanding one way or the other about Goldwood' s financial (~') standing but it would not have been surprising to have made some comment about Goldwood's capacity to complete when an extension of time for settlement was requested. It was submitted for Blakes that Mr Scott immediately responded to the request for an extension of time by imposing conditions and that this demonstrated that the chain of command to head office and back was not invariable. I doubt that it can be drawn from the evidence that Mr Scott made an "immediate" response, or if he did that it was not confirmed by head office. The recollections of all the witnesses for detail was very poor and without the file notes would have been sparse indeed. I conclude that Mr Scott would have informed head office had he been told of the lack of ministerial consent when considering the request for an extension of time. Ms Petrie telephoned Mr Scott on 17 March to confirm the instruction that she had obtained from Mr Short, namely, that (, ( \ ...__ __./ -- 15 of 49 -- 15 Berrivale did not wish to extend time, but if it did so, it would be on the conditions mentioned, that the balance of 10 percent of the purchase price be paid by way of further deposit, together with default interest at 18 percent per annum from due date for settlement to the extended date. Elliotts sent a fax to Blakes dated 20 March in which reference was made to "our discussion of this morning". That would appear to be a reference to the conversation on the morning (- of Friday 17th, as there was no conversation on the morning of ( Monday 20th. The letter confirms that FIRB was no longer required and sought an extension until Friday, 21 April 1989 for settlement. The following day Ms Petrie received a response to her letter of 15 March from the LAC advising that, because the lease was situated within an industrial park establishment, the matter had been referred to the Department of Industrial Development and that upon receipt of that Department's views further advice would be forthcoming. Ms Petrie considered that in that circumstance it was unlikely that the Minister's consent would be forthcoming by 22 March. She expressed considerable \_j concern to Mr Short and in particular that Berrivale did not know about the lack of ministerial consent. She asked Mr Short to speak to the client and explain what had happened. She was of the view that someone more senior needed to be involved. Mr Short agreed to look after the matter and to speak to the client. Ms Petrie herself did not mention the lack of consent to Mr Scott. On 21 March Ms Petrie telephoned Mr Holmes, an officer at DID, who informed her that on a transfer of a Crown lease DID -- 16 of 49 -- 16 usually required details of the manufacturing business, names of directors and an undertaking from the incoming directors that they would carry out all the conditions of the lease. On that day Ms Petrie sent a fax to Elliotts agreeing to the extension of time to 21 April 1989 on the conditions previously discussed with Mr Scott. She received a fax from Elliotts inquiring as to the consent of the Minister for the transfer of the lease and proposing the following: "If it transpires that in fact the consent of the lessor has not been given, and as a consequence the vendor is not in a position to provide a registrable transfer, we propose that the date for completion be amended, by consent, to the later of 12 April 1979 or 7 working days from the date on which the consent is granted and advised to the purchaser." Ms Petrie did not mention to Mr Scott that no consent had been obtained but she raised the Elliott' s fax with Mr Short who instructed her that she should inform Elliotts that Berri vale was not prepared to extend the contract because it did not consider that Goldwood was a bona fide purchaser and the conditions proposed would establish its bona fides or Goldwood could make C) (_) () a counter offer. The time for settlement was extended to the following day, 23 March, to enable instructions to be obtained (J and she was instructed to tell Elliotts that the contract would be terminated and another buyer found if the conditions for extension were not agreed to. Ms Petrie in her evidence did not say that Mr Short told her that he had informed Mr Scott of the lack of consent to transfer which would allow Goldwood to avoid the contract. Mr Scott did not mention the lack of consent in discussions with Ms Petrie about the extension of time. If he had been clearly informed of this by Mr Short it is quite -- 17 of 49 -- 17 surprising that it was not alluded to at all conversations with Ms Petrie. Ms Petrie conveyed those instructions to Elliotts by telephone and confirmed by facsimile. It seems that during that conversation Elliotts became aware that no consent had been obtained by Berrivale. The following day, the 23rd, Elliotts sent a facsimile letter to Blakes invoking cl. 16 of the contract and giving notice that since the consent of the lessor was not ( available by the date for completion the contract was at an end and sought the return of the deposit of $10,000. Some time later Ms Petrie was asked by Mr Short to prepare a summary of-what had been done by Blakes on the conveyance. Mr Short said that he had been asked by Mr Scott to prepare a letter to be sent to Berrivale explaining how it had lost the contract with no recourse against Goldwood. Mr Short then prepared a lengthy letter dated 13 April 1989. Mr Scott came into Blakes where the contents of the letter were discussed with him and, as a result, according to Mr Short, the letter was no longer required by Mr Scott. In any event it was never sent. Mr Short says that it accurately reflected his and his firm's dealings with Berrivale to the date of termination. Mr Douglas for Berrivale put to him that that letter was significant for what it did not contain. It is therefore relevant to set out certain passages of the document: "We experienced considerable difficulty in ascertaining whether the Purchaser had obtained FIRB approval and were finally advised verbally by the Purchaser's solicitor on 17th March 1989 that FIRB approval would not be necessary. This was confirmed in writing by the Purchaser's solicitors on 20th March 1989. In fact for a considerable period of time the only response we could get from the Purchaser's -- 18 of 49 -- 18 solicitors was that they did not have instructions from their client. In the absence of advices from the Purchaser's solicitors and without having particulars necessary for the application we finally wrote to the Land Administration Commission on the 15th March 1989 in relation to the request for consent to transfer on the basis that further particulars of the Purchaser would be provided when available. Whilst we were well aware that at that late stage formal Land Administration Commission consent would not be available by the 22nd March, we were not concerned specifically as to this because of the unlikelihood of FIRB approval being obtained by that date. We fully anticipated that the completion date would be extended by agreement or that the contract would be determined for want of FIRB approval. We did not of course anticipate that the FIRB requirement would be waived al together by the Purchaser, which even in hindsight seems inconsistent with the Purchaser subsequently terminating the contract a few days later for want of consent to the transfer. It would seem to us that it may have been the Vendor's refusal to extend unless certain new conditions were met which resulted in the Purchaser's change of intention to purchase. We note that the Purchaser requested an extension of time for settlement beyond the 22nd March 1989 to 21st April 1989 and then later to 12th April 1989 or seven days from written notice that consent to transfer was available. This was discussed at length with Peter Scott. We pointed out in those discussions that the Vendor would only be entitled to forfeit the deposit if in fact it were in a position to complete itself; specifically only if we had obtained the consent under clause 16. The general view expressed to us by the company was that it was not prepared to extend time for settlement unless the Purchaser was prepared to more substantially commit itself to the contract by lodging a full 10% deposit and by agreeing to pay interest at current rates. The company seemed to be of the view that the Purchaser was not a serious purchaser and was merely seeking time in order to tie the property up for as long as possible." It is clear that the summary of the contents of the letter to the LAC as set out above was not correct (it did not appear in this way in Ms Petrie's summary). It also implies that Blakes was actively involved in trying to get particulars for the application from Elliotts which was not correct. Nor was it c/ -- 19 of 49 -- 19 correct to say that the requirement for FIRB approval had been waived. It simply was no longer required. But the point made by Mr Douglas was that the failure to set out the advice which Mr Short says that he gave to Mr Scott, namely, that there was no ministerial consent to the transfer and that Berri vale's position was extremely delicate and it was rash to impose onerous conditions for the extension of time. Mr Short said that the letter was merely a summary and it was unnecessary to spell out r-. the detail of the advice and, in any event, that advice was \ alluded to when the letter states that Blakes had pointed out that the deposit could only be forfeited if Berrivale were in a position to settle. Mr Short maintained that· all the implications of pressing ahead with the conditions for an extension were explained to Mr Scott and that he was adamant that Berrivale wished to proceed in this way. This was the most important matter to convey to Berrivale after the termination of the contract because, on Mr Short' s evidence, it was only Berrivale's stubborn adherence to its conditions for extension against his advice that it was in no position to do so which caused the contract to go off. It was, in the circumstances, more than a little curious that the matter was hardly touched upon in the letter. Berrivale refers to Mr Short's answers to interrogatories to support its submission that no advice was given that ministerial consent would not be forthcoming for settlement and that accordingly Berrivale was in no position to settle. In his answers to interrogatories, Mr Short swore that the plaintiff was given that advice and that it was given between December 1988 and -- 20 of 49 -- 20 March 1989 on various occasions, about which he was unable to be specifi~. In his oral evidence he said that the advice was given to Mr Scott in the period between 20 and 22 March. He was challenged as to how he was able to be precise about those dates when on two occasions in answers to interrogatories, that is the answers themselves and the further answers, he was unable to fix the time with precision. He responded that although he did have access to whatever documentation he needed for the purpose of preparing his answers to interrogatories, he had only looked (', "'· ,i closely at the diary notes on the file and been able to reach that conclusion when preparing to give evidence in the trial. As C\I have commented, Mr Short had limited recollection of the detail .· of these events. rt is more likely than not that Mr Short has mistakenly reconstructed his evidence by reference to the correspondence and file notes. Blakes submitted that support for the conclusion that the advice was given prior to settlement comes from the evidence that Mr Nicolai said he learnt for the first time of Berri vale's inability to obtain damages for breach of contract from Goldwood l,·' ./ when told by Mr Scott in Brisbane on their way to see Mr Short. L This, Mr Morrison submitted, showed that Mr Scott must have been told prior to settlement date because there was no evidence that Mr Scott spoke to anyone at Blakes after that date before mid- April when he discussed the letter dated 13 April. I am unable to draw that conclusion. The solicitors for Berrivale's mortgagee had arranged to attend at the settlement which did not occur and it would be surprising if some communication did not take place. Further Mr Short said that Mr Scott contacted him -- 21 of 49 -- 21 for a written explanation as to why the contract went off which must have been sometime prior to 13 April. I conclude that neither Mr Short nor anyone else at Blakes advised Berrivale, through Mr Scott, of the absence of ministerial consent prior to settlement date and the implication of insisting upon the conditions which it did for the extension of time. The question than is to what extent if at all was the (- failure by Blakes: \ (1 \ ' to apply promptly for the Minster's consent; and/or to advise Berrivale when the purchaser sought an extension of time to complete the contract that if Berrivale did not unconditionally agree to the extension of time it was at risk, in the absence of the Minister's consent, of the purchaser terminating the contract pursuant to cl. 16 and being entitled to the return of the deposit, a breach of the duty of care owed to its client? It is now well recognised that a solicitor's duty to a client may be founded concurrently in contract or in tort, Aluminium Products (Qld) Pty Ltd v. Hill (1981] Qd.R. 33; Hanflex Pty Ltd v. N.S. Hope & Associates (1990] 2 Qd.R. 218; Midland Bank Trust Co Ltd v. Hett Stubbs & Kemp (1979] Ch. 384; Henderson v. Merrett Syndicates Ltd [1994] 3 W.L.R. 761; and White v. Jones [1995] 2 W.L.R. 187. For present purposes the only distinction of significance lies in the fact that proof of breach of contract entitles a plaintiff to nominal damages whilst damage is the gist of a plaintiff's action in tort. Demack J, (with whom Kelly SPJ and Kneipp J) agreed in _H_a_n_f_l_e_x__P_t...._y_L_t_d__v_.__N_.S_._H_o_.p~e__& -- 22 of 49 -- 22 Associates supra, described a solicitor's duty to his client at pp. 226-7 as: "The duty which a solicitor assumes when accepting a retainer is to bring to the task to which the retainer relates the exercise of a reasonable degree of care and skill: Lanphier v. Phipos (1838) 8 C. & P. 475; 173 E.R. 581. This involves the application both of skill and of knowledge: Spector v. Ageda [1973] Ch. 30, 48. The standard for the discharge of this duty is that of an ordinary skilled solicitor. Just exactly what this will mean in an individual case depends very much upon what the solicitor was employed to do: Griffiths v. Evans [1953] 2 All E.R. 1364, 1369. That case illustrates that this is an issue upon which minds may differ. Somervell and Romer L.JJ. agreed that a solicitor consulted by an injured workman about his workers' compensation rights was not negligent in failing to advise him of his common law rights. Denning L.J. (as he then was) delivered a confident dissenting judgment. When professional negligence is alleged in most instances expert evidence is called. But in the case of a solicitor, 'the Court presumably knows for itself what the ordinary reasonably prudent and careful solicitor ought to know to do', per Bray C.J., Neagle v. Power [1967] S.A.S.R. 373, 376, see also Fox v. Everingham (1983) 50 A.L.R. 337, 346. Part of that knowledge is contained in the reported cases." It is a solicitor's duty to carry out non-contentious matters according to the regular methods prescribed by statute, rule or (_/ custom, Halsbury 4th ed. vol. 44 para. 138; Cordery On (_/ Solicitors, 8th ed. (1988) p. 143. In Ashton v. Wainwright [1936] 1 All E.R. 805 the defendant's solicitor failed to inform the client that consent had not been obtained from the relevant government authority for the transfer of registration of a club. The club moved into the premises and was subsequently raided and fined for supplying drink at an unregistered club. The solicitor was held to be negligent in failing to communicate to his client the .failure to obtain the consent so as to expose the club to the -- 23 of 49 -- 23 risk which eventuated. Cordery, op. cit., recognises the difficulty in defining the exact scope of a solicitor's duty to protect the client's interest, but says that the solicitor should "at least": "(a) carry out his instructions in the matters to which the retainer relates, with diligence and by proper means; (b) consult with the client on all questions of doubt which do not fall within the express or implied discretion left him; and ( c) keep his client informed to such an be reasonably necessary, and reasonable requests from the information about his affairs." extent as may comply with client for ( The solicitor's duty will be defined by the retainer and in the present case there is no argument that Blakes were retained to do all things necessary on the vendor's side to complete the conveyance by the due date for settlement. Mr Short initially said in evidence that there was some doubt on the face of cl. 16 as to whose responsibility it was to ' ' "~) obtain the Minister's consent. After some further questioning, he agreed that in practice it was the lessee's obligation to obtain the consent acting as a conduit for transmission of relevant information to the LAC from the purchaser. Section 286 of the Land Act 1962 makes it plain that the obligation is the lessee's and Mr Short's reluctance readily to agree to this was consistent with his reluctance to assume any responsibility for the conduct of the retainer. Mr Spence gave evidence as a solicitor expert in conveyancing. He said, as might be expected, that Blakes ought to have put in train the process for consent, bearing in mind the limited time until settlement, as soon as the contract was received. That did not occur and in not so doing -- 24 of 49 -- 24 Blakes breached its duty of care to the client. The more important question is whether that breach was productive of loss which I will turn to after considering the second allegation of breach. Although the pleadings particularise Blakes' negligence in a number of respects, not all were pursued in evidence or in submissions. In careful and detailed submissions Blakes' counsel did so, but since those particulars are not relied on I shall not canvass them. The remaining complaint of negligence is two-fold and adequately expressed in the following way: (i) that Blakes was negligent in not advising Berrivale, at least as soon as the c~; extension of time was requested, that the consent of the Minister had not been obtained and was unlikely to be forthcoming before the due date for completion and, (ii) if Berrivale did not agree unconditionally to the extension of time sought or did not reach some other agreement with the purchaser about obtaining consent, Berrivale was at risk that the purchaser would terminate the contract and seek the return of the deposit. It is not part of a solicitor's duty, in the absence of special instructions, to advise a client on matters of business, Cordery op cit p. 138. However until Berrivale was fully informed that it was in no position to settle it could not make an appropriate decision about where its best interests lay. I doubt that it was necessary, in order to acquit its duty, for Blakes to spell out to Berrivale the risk associated with seeking to impose onerous conditions for an extension of time in terms of the survival of the contract. C -- 25 of 49 -- c~, ( 25 As found above, I have concluded that Blakes failed to take prompt action to seek the Minister's consent and that Mr Short is mistaken in his recollection that he told Mr Scott in clear and unequivocal terms that no consent had been or could be obtained in time for settlement and that accordingly the purchasers would be entitled to terminate the contract without penalty pursuant to cl. 16. Accordingly, I find that: • • Blakes breached its duty to Berrivale when it failed to take prompt action to seek the Minister's consent for the transfer of the lease to Goldwood and, breached its duty to Berrivale when it failed to inform Berrivale that no consent had been or would be obtained in time for the settlement and that the purchasers would therefore be entitled to terminate the contract without penalty pursuant to cl. 16, and that that was a matter for Berri vale to consider in deciding whether to grant an extension of time on terms or otherwise. Causation In order to be successful Berrivale must show to the civil standard that the negligence of Blakes has caused it loss. That question may be seen as more difficult to answer in a case such as the present when the loss which is said to have been caused by the negligence is the deprivation of a commercial opportunity which may or may not have come to pass. Of that, Mason CJ, Dawson, Toohey and Gauldon JJ said in Sellars v. Adelaide Petroleum N.L. (1992-4) 179 C.L.R. 332 at p. 355: " the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance -- 26 of 49 -- 26 of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. It is no answer to that way of viewing an applicant's case to say that the commercial opportunity was valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable." There is no doubt the failure to obtain the Minister's consent by the due date for completion was the proximate cause of C-) Goldwood terminating the contract without penalty. Counsel for Berrivale submit that that is sufficient for Berrivale to succeed on the causation issue but in my view it is not. In legal terms it is necessary to establish that that lack of consent was caused by the negligence of Blakes. What must be established by Berrivale on the:balance of probabilities is that but for the negligence of Blakes the consent would have been forthcoming, approaching the matter in a commonsense fashion, March v. Stramare Pty Ltd (1991) 171 C.L.R. 506; Medlin v. SGIC (1995) 69 A.L.J.R. 118 at pp. 121 and 128. (j Mr Short agreed that this was a straightforward conveyance. (j The evidence was that in an ordinary case it would take between two and three weeks to obtain the consent, but with the DID involved it could take four weeks. However provided the lease conditions had been complied with to date of the application to transfer then it seems that a decision aould be made in a few days. Although the consent is a discretionary matter there was no suggestion from any witness that it was difficult to obtain or was likely to be withheld if certain information routinely -- 27 of 49 -- ( 27 required by the DID and the LAC in such cases was forthcoming. Ms Petrie was informed by Mr Holmes of the DID that it required to know the manufacturing business proposed to be carried on on the land, the directors' names and an undertaking by the directors to meet the conditions of the lease. The conditions of the lease had been carried out by Berri vale to the LAC' s satisfaction. DID had to be satisfied that what was going to be carried on was an accepted industry. The outgoing industry processed fruit for juice, and the incoming business was to process kiwi fruit and orange juice. Notwithstanding extensive cross-examination of Mr Stubbs from the LAC which sought to establish a requirement by the DID for extensive details about the business and its financial backing, I am persuaded that the LAC would be guided by the attitude of the DID, which in turn was only concerned that what was to be carried out on the land was of the same kind as was previously carried on. I am not persuaded that DID would have been concerned to investigate whether the purchaser Goldwood would itself carry on that business or some other legal entity associated with it. This is supported by the opportunity afforded by the LAC to Berrivale earlier to freehold the land. It was submitted for Blakes that even if requested Goldwood was in no position to provide the requisite information required by the DID and LAC. Counsel submitted, and I think this must be accepted, that it must be assumed that Goldwood would not have been dishonest in the provision of information in order to facilitate the consent. Goldwood had been established for the purpose of acquiring the Carole Park property from Berrivale. It was incorporated on 13 -- 28 of 49 -- 28 February 1989. It has since changed its name to Farmer Johnson Restaurants Pty Ltd. It had a cash backing of $2 and no other assets. In 1989 it was wholly owned by Farmer Johnson Limited, an unlisted public company. That company was owned as to 40 percent by Johnson Farm Management Pty Ltd, as to 43 percent by Mogare Pty Ltd and the balance as to 7½ percent each by Mr A Johnson and his brother, Mr F Johnson, with the remaining 2 percent by others. Mogare Pty Ltd was owned by Australian Blueberry Company Pty Ltd, which in turn was owned by Johnson Farm Management Pty Ltd, which was owned by Mr A Johnson. At that time the major activity of the Group was the production of blueberries at its farms in northern New South Wales. According to an ASC company extract the directors of Goldwood on 20 February 1989 were Mr A J Johnson and Mr T R J Millwood, the accountant for the Johnson group of companies. He ceased to act as director on 8 April 1989. On that date, in addition to Mr A Johnson, his brother Mr F Johnson, Mr PC O'Meara and Mr DJ Docherty were appointed directors. Mr Johnson was extensively cross-examined about the structure of ()/ () cj his companies, the proposed joint venture with certain New (_,; Zealand companies to process kiwi fruit at the subject premises and the capacity of the Johnson group of companies to finance the purchase of the lease. It is necessary to look at what was proposed by Goldwood for the land in February/March 1989 to deal with the issue of causation, but more particularly with respect to the assessment of damages. Exhibit 27 sets out diagrammatically the Farmer Johnson Group's corporate structure. It is of some complexity and generally is of no great concern in -- 29 of 49 -- 29 the resolution of this matter. Rural Finance Pty Ltd acted as banker to the Group companies and financed investors who subscribed to the Group's projects. It was wholly owned by J.F.M.I. Investments Pty Ltd in March 1989 whose ultimate ownership resided in Johnson Farm Management Pty Ltd. In late 1988 and early 1989 a limited partnership in which investors would be asked to subscribe was discussed between Farmer Johnson Limited (formerly Rivenhall Limited an earlier purchaser of the (-, land) and a New Zealand company, D.F. Mainland Nominees Limited, a company with which Mr S Cairns was associated, to import kiwi fruit from New Zealand into Australia together with New Zealand ( \ technology to process the fruit at premises to be acquired in Brisbane. A prospectus was prepared which never went to the public. It was never intended that Goldwood would operate the business which was to be carried on by a general partner for the purpose of the partnership. The Johnson Group was to provide the funds for the purchase of the land at Carole Park. No other land had been or was to be identified as appropriate for those purposes. As at the date for settlement of the contract, there \______) were a number of significant matters concerning the structure of the partnership arrangement yet to be completed. Although the subject of detailed cross-examination, in the end it is sufficient to conclude that the New Zealand based technology and know-how had not been acquired by the New Zealand or Farmer Johnson entities at the date of settlement and that was essential to the Carole Park project. Mr Johnson had started to become disenchanted with aspects of his New Zealand connections after 18 March 1989. Mr Cairns, the representative of the New -- 30 of 49 -- 30 Zealand side of things, to use that expression fairly loosely, had spent the period between 5 and 18 March 1989 in Brisbane and the Gold Coast in discussion with Mr Johnson and others working on the prospectus and in financial discussions. On the purchaser's side he alone had dealt with Elliotts. On or about 15 March he delivered the purchaser's copy of the contract to Elliotts and on Mr Johnson's instructions told the firm to do nothing on the conveyance. By 18 March when he returned to Auckland, Mr Cairns formed the view that the proposal would not go ahead. The question then is, had Blakes promptly attended to its duty and requested the necessary information from Elliotts for 0 the LAC and DID, would it have been forthcoming? Elliotts were in no position to provide it had a request been made on 28 February for they had no instructions at all. Elliotts would have had to seek out the client from the name and address on the contract held by Blakes, or in the absence of any instructions authorised Blakes to do so. Blakes could have sought initial information from the selling agent. The evidence suggests that Mr Cairns was the contact point. He knew little or nothing of lj Goldwood but was drafting the prospectus. He would no doubt have directed Elliotts to Mr Johnson. As I have mentioned, Mr Johnson was extensively cross-examined about the state of the proposal to import the kiwi fruit peeling and processing machine from New Zealand and establish the business at the premises at Carole Park in the time leading up to 23 March 1989. The focus of the questions was particularly upon the entity that would run the business. As at 17 March, Mr Johnson expressed his view that -- 31 of 49 -- ' ) ( ; .. __/ 31 there were "loose ends to be tidied up". That was something of an understatement as the partnership that was to run the business was not yet formed and the prospectus had not gone out to the investors. However, Mr Johnson was confident when Mr Cairns returned to Auckland that the business would be carried on at the Carole Park premises and the question was "when" rather than "if" and perhaps with entities other than Mr Cairns. As far as the project was concerned, the Carole Park contract was too early (it was the New Zealand interests' tardiness which disenchanted Mr Johnson) and Mr Johnson would have been anxious for an extension of time for settlement. I accepted Mr Johnson as a truthful witness. Counsel for Berrivale sought to rely in submissions on a finding about Mr Johnson's credit in another matter in the Federal Court. It was not raised in the trial and cannot be evidence. Those findings are not relevant to these proceedings. Mr Johnson recognised that he had a binding contract and would not lightly abandon it. Whether he would have done so later on the date of settlement or subsequently, is a different question. I have concluded that there was an expectation by Mr Johnson that a fruit processing business in one form or another would go ahead at the Carole Park premises up until 18-20 March. It came to an end on the recision of the contract. Had an enquiry been made at an appropriately early time the response would have been that the manufacturing business to be carried out on the premises was fruit processing. There was no reason for Mr Johnson not to provide the names of the directors - it is likely that they would have been those appointed from 8 April 1989 to Goldwood Holdings - but could have -- 32 of 49 -- 32 been Mr Johnson and Mr Millwood the group accountant. The directors were required to give undertakings to carry on the terms of the lease. The Second Schedule conditions in the lease had been complied with by Berrivale and related to development of the land which was apparently complete and would not have caused difficulty. The only other relevant condition was to pay the rent. It is likely that the directors would have given undertakings. Mr Johnson' s evidence was that as at 17 March, the date of the most recent proposal for the partnership, the identity of the lessee from Goldwood, the general partner, had not been identified, the partnership had not been formed, and the 0 r'; prospectus was not in final form. He agreed that no detailed \ information could have been given about those matters. The question is whether the LAC would have consented to the transfer of the lease without them. A general provision in the special lease provided that: "that the Lessee shall not in any way assign or sublet the said Land, or any part thereof, or grant to any person the right of occupation or tenancy to, over, or upon the said Land, or any part thereof, or of any structure or building erected thereon, without the consent in writing of the Minister for Lands and Forestry ... [and upon] the express condition that the Lease hereby granted shall be subject to the condition set forth in the Second Schedule endorsed here on " Whiles. 286 of the Land Act deals with transfers this condition deals with the situation which was expected to occur here, namely, that after transfer there would be a sublease to the partnership. Mr Stubbs, the senior land officer in the LAC, gave evidence. He held the Minister's delegated authority to approve or refuse transfers and was familiar with the requirements of the DID. He said that the DID might be interested in knowing how a -- 33 of 49 -- 33 business was to be carried on in the future, but that if the industry had been established and all the lease conditions had been complied with, it might not be too interested in the incoming person. Mr Stubbs had no particular understanding of the business of Berrivale or the proposed business to be carried on. A perusal of the Special Conditions in the Second Schedule makes it clear that they were to secure the development of the land for secondary industry purposes and to impose such requirements as the construction of approved buildings to be commenced within six months of the lease (February 1982) and the expenditure of specific sums of money on the development of the land within two years and further development of the land to the approval of the Minister for Lands and the Minister for Commerce and Industry. The lessee was also required to carry out a scheme of landscaping and beautification, to provide off-street parking facilities and generally to maintain the land in a satisfactory fashion. Those conditions had been met to the satisfaction of the LAC by Berrivale. The evidence in respect of the auction shows the land to have been fully developed. Mr Stubbs agreed .__,1 with Mr Morrison that the DID might be concerned to have particulars about a range of matters in theory. However the particulars of this application were not put to him and there is no basis on which to conclude that the consent would not have been forthcoming. As to the timing, Mr Stubbs said that an application could be "walked through" if first made on 15 March for settlement on 22 March, but it would be difficult. In the light of that answer it could be supposed that if an application were in place, for -- 34 of 49 -- 34 example, a week or so earlier that is, allowing from 28 February to 7 March to gather the necessary material from Goldwood, it could have achieved success. I conclude on the balance of probabilities that had Blakes made a prompt application for approval to the LAC, and sought the necessary information required by DID from Mr Johnson via Elliotts or elsewhere, information necessary to found the consent would have been forthcoming and the consent would have been obtained. Had the consent been obtained Goldwood would have been unable to take advantage of cl. 16 of the contract and could have been held to the contract by Berri vale. That constitutes the loss of a commercial opportunity which is not negligible, the quantification of which falls to be assessed. It is necessary to consider the second aspect of the negligence, namely, whether by failing to advise Berrivale, at least at the time when Goldwood sought an extension of time, that it had not obtained the Minister's consent to the transfer and was thus at risk that Goldwood could utilise cl. 16 to bring the contract to an end Blakes caused Berrivale loss. From about 17 or 18 March it was clear to Mr Johnson that the proposed \_, partnership was not going smoothly. The targeted dates in the prospectus could not be met. For the business to be viable it was necessary to have the particular machine which was to be manufactured in New Zealand and for which he had already paid $32,000 in part payment. The prospectus had to go to his investors well before the end of June for tax reasons. The originally preferred date was at the end of March, but that was not achievable. Mr Johnson would have accepted an extension of -- 35 of 49 -- 35 time had there been consent but its absence was seized upon to bring the contract to an end. It was thus necessary for Berrivale to agree to an extension of time which would allow it to obtain the consent before those behind Goldwood knew of the lack of consent. The first request was made on 17 March orally and confirmed in writing on 20 March by Elliotts. Until 18 March Mr Cairns was dealing with Elliotts. On 15 March Ms Petrie had asked Elliotts if that firm had applied for consent to transfer, r , so it can be assumed that Elliotts knew that Blakes had not. l However, it can also be assumed that that was either not passed on to Goldwood or its implications not noted. By its letter of ( 22 March, when reference was made to consent and a proposal that an extension be granted to 12 April or seven days from the date of consent for settlement of the contract, Berrivale was still in a position to agree and save the contract. That was the latest point at which the advice of no consent and the risk of cl. 16 could have been conveyed to Berrivale. Mr Nicolai and Mr Woods, whose evidence I have accepted, said that they would have given Mr Scott instructions to grant the extension had they ,_J been informed of those matters and Mr Scott would have conveyed those instructions to Blakes. Accordingly, the failure to give the advice has caused Berrivale the loss of the contract which was of some value. Damages Berrivale claims the difference between the net proceeds it would have received had the sale to Goldwood been completed and the net proceeds on the subsequent sale, together with costs thrown away and interest. Blakes charged only $2,500 plus -- 36 of 49 -- 36 outlays of $195.40 in respect of the conveyance. In calculating the costs of a successful conveyance to Goldwood, it is necessary to take into account a standard fee for a conveyance. Blakes charged a reduced fee because of the unsuccessful nature of the transaction. The scale figure set on their memorandum of fees is $5,180 plus outlays. That is the fee which would have been charged had the matter gone to completion. That reduces the figure claimed to $720,637.40. Despite pleadings to the contrary, at the trial and in submissions, there was no argument other than that Berrivale proceeded appropriately with respect to the resale of its (.~ ... property. It was not sought to prove that a better price could .. have been obtained. Accordingly, the amount of $720,637.40 is the starting point for the calculations. Blakes argued that Berrivale would have sold the land rather than seek specific performance had there been no settlement. Once Berrivale learned that Goldwood had no assets (and there were no directors guarantees) it would have been in something of a dilemma but may have elected to seek speci fie performance by way of summary judgment. The cost of obtaining specific performance was set out in an uncontroverted affidavit of Mr A J Wilson. He estimated that the solicitor/own client costs of successfully bringing a summary judgment application in which complex issues were not raised would be in the range of $8,000 to $10,000. If the matter involved triable issues and had to go through the normal course of litigation, he estimated the costs at an extra $20,000 to $25,000. That estimate was on the basis that the issues raised at trial would be straightforward and that discovery was not C. -- 37 of 49 -- ( 37 extensive. No triable issue is discernible on the material before the court, although that is not to say that some such defensive material would not have been presented on a summary judgment application. That is a matter to take into account in assessing damages. It is Berrivale's case that Goldwood would have settled the contract in full: • on the due date; or on an agreed extended date; or • after judgment for specific performance. The approach to the assessment of damages in a case such as the present is made by reference to probabilities or possibilities of the above actually occurring, The Commonwealth v. Amann Aviation Pty Ltd (1991) 174 C.L.R. 64 per Deane J. at p. 118. In Sellars v. Adelaide Petroleum N.L., supra, Mason CJ, Dawson, Toohey and Gaudron JJ concluded at p. 355: " we consider that acceptance of the principle enunciated in Malec requires that damages for deprivation of a commercial opportunity, whether the deprivation occurred by reason of breach of contract, tort or contravention of s.52(1 ), [of the Trade Practices Act], should be ascertained by reference to the court's assessment of the prospects of success of that opportunity had it been pursued. The principle recognized in Malec was based on a consideration of the peculiar difficulties associated with the proof and evaluation of future possibilities and past hypothetical fact situations, as contrasted with proof of historical facts. Once that is accepted, there is no secure foundation for confining the principle to cases of any particular kind." The principle in Malec v. J.C. Hutton Pty Ltd (1990) 169 C.L.R. 638 is to be found in the joint judgment of Deane, Gaudron and McHugh JJ at p. 642: "When liability has been established and a common law court has to assess damages, its approach to events -- 38 of 49 -- 38 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 percent - or very low - 0.1 percent. But unless the chance is so low as to be regarded as speculative say less than 1 percent - or so high as to be practically certain - say over 99 percent - 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 percent probability of occurring, but to ignore altogether a prediction which has a 49 percent 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] A.C. 166, at p. 174; Davies v. Taylor (1974] A.C. 207, at pp. 212, 219; McIntosh v. Williams (1979] 2 N.S.W.L.R. 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." There are a number of matters which call for consideration in evaluating Berri vale's loss of the opportunity to enforce successfully the contract: n (~ -- 39 of 49 -- 39 (a) The Minister's Consent The evidence in respect of this matter has already been considered when deciding if the negligence of Blakes caused the loss of a valuable commercial opportunity to Berrivale. Notwithstanding the lengthy and careful cross-examination of Mr Johnson by Mr Morrison about the New Zealand part of the proposed venture that sufficient information to satisfy the Minister would not have been forthcoming, I have concluded that (, there would have been sufficient information provided by Mr Johnson had a prompt application for consent been made after the receipt of the contract on 28 February 1989. That was ( evaluated on the civil balance of probabilities. For the purpose of assessing damages it is necessary to evaluate the loss of the chance to obtain the Minister's consent as part of the wider assessment of the loss of the opportunity to bring the contract to a successful conclusion. It should be borne in mind that even had a prompt application been made to the Minister it was possible that no such consent would have been forthcoming in time for completion on 22/23 March 1989 thus enabling Goldwood to have utilised the provisions of cl. 16 of the contract without giving rise to any liability in Blakes. To the extent that it might be helpful to break up the percentage prospect of each factor which should be considered in assessing the loss of the opportunity to complete the contract, I assess that there was a 70 percent likelihood that the consent would have been obtained within time or within any agreed extension of time. -- 40 of 49 -- 40 (b) Willingness of Goldwood to complete Mr Johnson was extensively cross-examined as to the likelihood that Goldwood would not complete the contract. Blakes pointed to the following matters as indicating that Goldwood did not intend to settle: • As at 15 March 1989 Elliotts had received no instructions from its clients in respect of the conveyance; • the deposit paid was trivial being some 0.6 percent of the purchase price when a normal deposit would be (l 10 percent; • the purchaser had been changed from Rivenhall Limited (which became Farmer Johnson Limited) to a new company without assets; • Goldwood did not seek to preserve the contract by paying the additional amount of the deposit or making a counter proposal; • Goldwood immediately purported to terminate the contract on the due date for settlement on the basis that the consent had not been obtained; • it did not subsequently try to repurchase the property when it was available for sale; • Goldwood had no need for the property as at the date of settlement. Mr Johnson considered that the contract was binding upon Goldwood up until 23 March and the tenor of his evidence was that he thought that he personally was exposed to liability. It took some persuasion on the part of Mr Morrison to get him to accept C -- 41 of 49 -- 41 a scenario in which there was no personal liability involved. If Mr Johnson allowed Goldwood to enter the contract knowing it was unable to meet its obligations under the contract he (and the other directors) may have been liable as director and therefore would have been unlikely to have allowed Goldwood to default. It is necessary to consider if a distinction can be drawn between the expectation held when the contract was executed on 3 February 1989 and the failure to bring to a successful conclusion the (-· issue of the prospectus and the raising of funds from investors by 22 March 1989. When the contract was executed by Goldwood the timing was short for the limited partnership scheme to be in operation at the time of settlement when the funds would have had to be provided, but I conclude that there was every expectation that the contract would be completed even if the funds were temporarily sourced elsewhere. \...__, It was put to Mr Johnson that if he had no personal exposure he would have allowed Goldwood to default on the contract because the only loss would be the deposit of $10,000. Mr Johnson said that he would have talked to a real estate agent as to what the property could be resold for. He described the period as "fairly heady days" and that property values were moving very quickly in a matter of months. He said that his first thought would be whether the Group could make money on the land or would there be a likely loss. He said that if the size of the potential loss, if the contract were settled, was small, in the vicinity of $100,000, he would have taken legal advice but would have been prepared, as I understand his evidence, to accept a loss of that order, but if the loss were to be substantial, extending to -- 42 of 49 -- 42 hundreds of thousands of dollars and he had received legal advice that Goldwood had excellent prospects of successfully resisting an action to perform, then he would have accepted that advice. He was concerned to point out that it was not only his personal liability which was to be considered but the position of the other directors of the company, Mr Docherty and Mr O'Meara. From the evidence of Mr Wall, a senior banker called by Berrivale and accepted by Blakes, it appears that at least Mr Docherty was a person of considerable reputation in the financial world and Mr Johnson's concern that they would need to approve such conduct is entirely reasonable, notwithstanding that Mr Morrison was concerned to press him only for his own views. In re-examination Mr Johnson said that in March 1989 the reputation of the Group was its "entire livelihood". He said that it was likely to affect adversely, both commercially and financially, the Group's reputation if the vendor, Berrivale, sued Goldwood for failure to settle the contract. He said that the Johnson Group would have incurred losses to protect its reputation at that stage. It was submitted on behalf of Blakes I C that this evidence of reputation was unreliable and there was no (_/ evidence that failure by Goldwood to settle could, or would damage the Farmer Johnson Group's reputation with investors. I would not have thought it necessary that there be particular evidence to that effect. Whether or not investors would put money into the various projects sponsored by the Farmer Johnson Group must, one would have thought, depend on the perception that the Group would conduct .itself with respect to its contractual obligations with integrity and not lightly abandon them. There -- 43 of 49 -- ( ) 43 is thus evidence to conclude that Mr Johnson and his fellow directors would have been willing to complete the contract. Goldwood may have looked for other uses for the premises or sold the land. It is unlikely that Goldwood would have caused Berrivale to go to litigation to complete because that would have been detrimental to its reputation which I accept was important. On the other hand it may have and, as I have mentioned, that should be taken into account. Balanced against the considerations which I have set out favouring a willingness to complete are the matters raised by Blakes, the most compelling of which are a reasonable prospect that there was no risk of personal liability in Goldwood' s directors, the loss limited to forfeiture of the deposit of $10,000 and the fact that at the date for settlement the land was surplus to Goldwood's, and, importantly the Farmer Johnson Group's requirements. I conclude that there was an even chance that Goldwood was willing to complete the contract. (c) Ability of Goldwood to complete the contract Goldwood being a $2 company with no other assets could not "--; have completed the contract. Mr Johnson said it would have obtained funds from Rural Finance Pty Ltd which were on deposit at the time or by Farmer Johnson Limited borrowing funds or Goldwood borrowing funds externally. • Rural Finance Pty Ltd The financial statements of Rural Finance were put in evidence as at 30 June 1989. Its net assets were then $88,125. The bulk of its assets at that date were represented by loans to investors and others. The accounts showed cash at bank at -- 44 of 49 -- 44 30 June 1989 as standing at $3,330,286. But the evidence revealed that about $3,000,000 of that money was raised from the Red Claw prospectus, another venture of the Farmer Johnson Group. That money accordingly would not have been available to Rural Finance to fund the purchase of the property at Carole Park. As at 23 March 1989 Rural Finance had $1,348.09 in its Commonwealth Bank account and $58,709.39 in its State Bank of New South Wales account. The financial records show that as at 30 June 1989 Rural Finance had current assets being loans to investors of approximately $7,874,788. There was no evidence that those moneys were immediately recoverable but rather that they were ., repayable out of proceeds of the particular project and after (-~ some years. I am not persuaded that there was any capacity in Rural Finance to fund the purchase price of the land at Carole Park with funds held by it on 23 March 1989. • Farmer Johnson Limited The Farmer Johnson Limited Group accounts as at 30 June 1989 showed approximately $77,610 in cash at the bank and the major current asset described as "others" was $4,826,230. Of that amount $4,015,015 represented prepayments of the company to other ( \_J members of the Group and $677,420 of funds on deposit were funds held by Eagle Star for the Red Claw project. There is some doubt on the book figures as to whether Farmer Johnson Limited had access to available funds from Rural Finance. • New Zealand Limited partnership It was likely that had the partnership come to fruition the property would have been acquired from the proceeds of the investors' funds. There was no doubt however that that was not -- 45 of 49 -- 45 able to happen by 23 March 1989 or indeed any reasonable extension time thereafter. That that partnership might have been resuscitated seems to be unlikely. Borrowings external to the Farmer Johnson Group Mr Wall, a banker, gave evidence as to the approach that a first level lending bank would take to requests to borrow a sum of money in the vicinity of $1 . 79 million to purchase Crown leasehold property. He agreed with a number of matters which (' were put to him in cross-examination as being pertinent to a decision to lend. Of greatest importance to him was what he called the "personal equation" - an assessment of the people behind the entities who were borrowing. There is no doubt that he was considerably impressed by at least two of the directors involved in the Goldwood company and accordingly would have been well disposed towards the loan. It is the case that an approach by Mr Cairns to Westpac at Southport apparently to fund the project was unsuccessful, but nothing of detail is known of that approach. There is no doubt that the servicing of the debt would be important to a financier but with interlocking solid ~~ securities that may not have been of overwhelming importance to a lender. Mr Wall thought that in March 1989, there were financiers other than first level banks available to lend in the marketplace and who would do so. So far as can be ascertained there were no negative aspects in defaulting terms associated with the Farmer Johnson Group at that time and a second level financier, perhaps as Mr Wall mentioned, the Group's own State Bank of New South Wales, from which it had already borrowed funds, would have provided the necessary funds. Immediately -- 46 of 49 -- 46 .. ' following the termination of the Carole Park contract a new Group company purchased blueberry farms in New Zealand borrowing $1 million from the Auckland branch of the ANZ Bank for that purpose. That supports the view that a loan in the vicinity of $1.79 million may have been forthcoming. I conclude that there was at least an even chance that funding would have been available to complete the contract. The exercise which has to be undertaken in a case such as this is to evaluate the loss of a valuable opportunity. The evidence does not demonstrate that the degree of certainty that the completion of the contract would have occurred was such that no deduction ought to be made. To the contrary, there was some prospect that the Minister's consent would not have been granted. (~~ The likelihood of Goldwood seeking to obtain finance and actually getting it was an even chance. I have concluded that the chance was no greater than 55 percent that Goldwood would have settled the contract or that the proceeds of a judgment would have been available to Berri vale. Calculations Moneys which were to be received on the proposed settlement l~ with Goldwood on 22 March 1989 were as follows: Sale Less Less Less Price estimated estimated outlays agents' commission at 2.5% legal fees (Law Society Scale) $1,790,000.00 $44,750.00 $5,180.00 $195.40 $1,739,874.60 -- 47 of 49 -- 47 Moneys received from the sale on 18 October 1990 were as follows: Loss Sale Price Less commission at 2.5% Plus interest on deposit Less Legal fees $1,050,000.00 $26,250.00 $787.84 $5,300.66 $1,019,237.20 $720,637.40 Although by its amended statement of claim Berrivale seeks costs thrown away on preparation for completion of the contract, none apart from Blakes fees was proved, although Mr Nicolai mentioned that Berrivale had to pay the costs of the representative of the mortgagee, the State Bank of South Australia attending the settlement on 23 March without specifying that fee. No claim has been made for the costs of putting the land to auction unsuccessfully. In fixing the figure of 55 percent as the likelihood of Berrivale receiving the net proceeds of the sale to Goldwood, I have taken into account extra legal costs associated with the possibility that the matter may have proceeded to litigation. Fifty five percent of $720,637.40 is $396,350.57. Berrivale claims interest at 12 percent per annum (simple interest) in its submissions. That seems reasonable. I must decide from what date that ought to be applied. It seems likely that Goldwood would have obtained an extension from Berrivale probably until 21 April 1989. I propose to award interest from the end of April 1989, which is 6¼ years. calculation is - $396,350.57 X 12% X 6¼ = $301,226.43 The interest -- 48 of 49 -- 48 Orders There will be judgment for the plaintiff against the defendant in the sum of $396,350.57 together with interest thereon in the sum of $301,226.43. I give liberty to apply with respect to the arithmetical calculations. I will hear submissions as to costs. C ( -- 49 of 49 --