Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd P47/2000 [2001] HCATrans 547 (24 October 2001)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Perth No P47 of 2000

B e t w e e n -

PLACER (GRANNY SMITH) PTY LTD

Applicant

and

THIESS CONTRACTORS PTY LTD

Respondent

Application for special leave to appeal

GLEESON CJ

McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT PERTH ON WEDNESDAY, 24 OCTOBER 2001, AT 11.08 AM

Copyright in the High Court of Australia

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

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

GLEESON CJ: Mr Gilmour.

MR GILMOUR: Your Honours, we propose to focus in our oral submissions on the first and last special leave questions. The first is the evidentiary burden question where one's breach and loss have been established, whether the defendant has an evidentiary burden to bring forward all relevant, innocent explanations to unravel the question of damages. The second is the fundamental error of fact.

GLEESON CJ: Mr Gilmour, can you just direct me to your draft notice of appeal, please.

MR GILMOUR: Page 396.

GLEESON CJ: Thank you, I just want to check one thing. The orders you seek - as I understand it, if you were granted leave to appeal, you would set out to persuade us either that the way the trial judge went about assessing the damages was correct, is that right?

MR GILMOUR: That would be our first proposition, yes.

GLEESON CJ: If we disagreed with that, what you would want us to do is to remit the matter for a further hearing?

MR GILMOUR: On damages, yes.

GLEESON CJ: On damages. You would not contemplate inviting us to assess the damages on any basis different from the trial judge's assessment?

MR GILMOUR: No. We say there is a basis to uphold his Honour's approach. If we are wrong about that, then it should be sent back for reconsideration.

GLEESON CJ: While I am interrupting you, another small matter of detail. On page 388, in the first paragraph, the Full Court speculates about the possibility that there may be evidence from which damages could be assessed in the way they think they should be assessed.

MR GILMOUR: Correct.

GLEESON CJ: But the Full Court did not put the matter back in for further argument on that question.

MR GILMOUR: That is so.

GLEESON CJ: In your submission is there evidence of the kind to which they there adverted as a possibility?

MR GILMOUR: In our submission, your Honour, there is not evidence that was before the trial judge. Whether there is or is not evidence, which is really a matter of proposition put to the Full Court from the Bar table by our friends, I am unable to say.

GLEESON CJ: Does it follow from that that you do not criticise the Full Court for not putting the matter back in for further argument?

MR GILMOUR: Your Honour, we do not criticise it in that particular respect. We criticise the Full Court for posing questions in relation to the question of damages generally, which might have been ventilated before the trial judge had it been remitted, but not putting that up for argument as to - and in turn answering its own questions.

GLEESON CJ: But you are not saying to us that what the Full Court should have done in the light of what they said at page 388 was to put the matter back in for further argument before the Full Court to enable you to demonstrate to the Full Court that there was, in fact, evidence of the kind they there referred to before the trial judge?

MR GILMOUR: Not for the applicant, your Honour.

GLEESON CJ: Thank you.

MR GILMOUR: Your Honours, in this case, putting it broadly, we have findings of deceit which are concurrent. We have findings of breach of contract involving breach of good faith which are concurrent. We have, effectively, concurrent findings of breach of fiduciary duty - I say concurrently because of the way that it was dealt with by the Full Court. We also have concurrent findings that those breaches evidenced damage which, on any view, is reckoned in the millions of dollars. That is across a number of very strong findings in relation to the different areas of dishonesty.

In effect, what the Full Court did was that, upon the submission of our friends in the Full Court that there may have been those possibly, speculatively, other innocent explanations which would go to diminish the quantum of damages, not eradicate it, but diminish it, but because we the plaintiff, the respondent in the appeal, did not bring these forward that we thereby failed to discharge the burden of proof. The relevant passages of the Full Court in relation to this approach are broadly - I do not need to take you to them at the moment - at paragraph 202, at the very end of the judgment, deals with specifically the issue of burden of proof. The Full Court's reasoning really starts at the foot of page 377, at paragraph 170, the very last line it says:

We have drawn attention to the fact that the reliability of his Honour's approach is entirely dependent on there being only three sources from which Thiess could earn profits under the contract, these being the agreed 5 per cent allocation, cost underruns and productivity gains -

At 172, the last four lines:

This emphasises the significance of whether there were any other areas in the contract which could have allowed Thiess to make profits over and above those taken into account by the learned Judge.

Paragraph 173 speaks of Thiess contending the matters in relation to productivity gains in the drill and blast section of the work. Over the page, 174:

Moreover, profits could have been derived from efficiencies (other than productivity) in areas such as site costs. No findings were made in regard to whether such efficiencies had been achieved. The fact is that this was not a live issue at the trial.

That is a fact, those matters were not a live issue at the trial. The respondents before this Court, the appellants below, at the trial they advanced what they said were honest and innocent explanations for Thiess making more than 5 per cent under the contract. They pointed essentially to productivity gains. That was the subject of a deal of evidence in great detail before the trial judge. The case for the respondent was rejected.

GLEESON CJ: How long do you think an appeal would last if you were given the - - -

MR GILMOUR: Your Honour, if we are right about the fundamental mistake that the Full Court made as to the way the trial was run, we think that the matter could be dealt with in less than a day. Your Honours will see at 177 that the Full Court emphasises that not even the trial judge concluded on the evidence "that the method he adopted catered for all sources of profit", and that is so. They go on to say:

In explaining why he used the method in question, the learned Judge said:

"It is not suggested by Thiess -

so clearly the trial judge linked it to the evidence brought forward by Thiess to explain or unravel the issue of damages.

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

It then goes on to say, referring to the submission by Mr Ainslie who ran the question of damages in the Full Court and at trial:

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

In our submission, and we say this is apparent from the way that Mr Pringle, then senior counsel for the respondent, at the trial opened the case and closed the case, that the innocent explanations that were to be advanced, and which were advanced and which were substantially rejected, related to two things. One, they said that the increase over the internal plant department rates that were charged to Placer were justifiable. In every instance those were rejected by the trial judge. These are reckoned in the millions of dollars. Then there was the question of productivity. They said that they had gained large additional profits above 5 per cent on the basis of productivity gains. Other than as to $500,000, the trial judge rejected all of those explanations and that evidence.

The conceptual error of which the Full Court, in our submission, made is exposed at paragraph 185 on 383 where, at the beginning of that paragraph their Honours, in the joint judgment, speak of some tactical decision that might have been made in holding back evidence in relation to defending our counterclaim as opposed to the evidence that was advanced in support of their claim. But you really understand, with respect, the error in the last several lines when their Honours said:

Moreover, the issues concerning Thiess' claim and Placer's counterclaim relate to different periods in time. Thiess' claim concerns the profits it would have made had the contract not been terminated. Placer's counterclaim concerns the moneys overpaid by it prior to termination.

What that ignores is the evidentiary reality that the evidence upon which Thiess relied in order to demonstrate its loss of profits after termination and into the future, was by reference to the profits that it had made pre-termination. That was the only basis it could have advanced evidence. It alleged that it had made more than 5 per cent prior to termination - it actually said it made 7.5 per cent for the reasons that I mentioned - and that on that basis it was entitled to, upon an extrapolation of that extra percentage, across the life of the contract.

For its part, Placer was counterclaiming for fraud, for a breach of fiduciary duty, a breach of contractual duty of good faith, on the basis that we contended, and there is concurrent findings, that it was the fact that Thiess had dishonestly inflated its plant rates above what were genuine estimates. All of that evidence was accepted. But in further answer to that counterclaim, Thiess' explanation as to the plant rates having been rejected, Thiess also advanced the evidence that it had made permissible, honest gains above 5 per cent by way of productivity gains.

So viewed in that way, it is plain enough that the evidence, whether it is on the counterclaim or the claim, was the same. It is, with the greatest of respect, incredible to think that in advancing its claim for a loss of profits, including above 5 per cent, that Thiess would have held back innocent explanations which should have seen its claim for damages increased beyond what it claimed. On the other hand, that it would have held back those same honest and innocent explanations which would, had they been advanced and accepted, have resulted in the diminishment of Placer's damages.

It is a long answer to your Honour the Chief Justice's question, but if we are right about that, the way that the matter was run and the evidentiary embrace going both to the claim and the counterclaim, then we think that your Honours can dispose of the appeal fairly quickly and simply restore the trial judge's assessment. It was a sensible assessment. In the end he said, "These explanations have been given by Thiess. I reject the inflation of the rates entirely. I accept productivity as to half a million. You, Thiess, have not advanced any more."

GLEESON CJ: Does the case involve a question of onus?

MR GILMOUR: Only in an evidentiary sense, your Honour. That is our special leave point. We say that, in the same way as in Henville v Walker on a trade practice case and Watts v Rake on negligence, that here in contract or in breach of fiduciary duty that once you have established breach and either imputed loss or actual damage, although quantum is not proved with complete accuracy, that it is the job of the defendants, the burden is on the defendant.

GLEESON CJ: Am I right in thinking that in the present case the evidence relevant to these issues that the Full Court thought had not been properly addressed was all evidence internal to the respondent?

MR GILMOUR: Yes, and that was our case: that not only is it for the respondent to bring forward that evidence, but in this case that evidence was within its possession. It was claiming not just the 5 per cent, but above 5 per cent by reference to the profits it said it had honestly made.

GLEESON CJ: It was evidence about its own financial affairs.

MR GILMOUR: And, in particular, about its performance of the contract prior to its termination and the profits that it had made. The Full Court was right. The speculative, innocent explanations advanced from the Bar table before the Full Court were not a live issue at the trial because they were not raised. With respect, how could we raise supposed innocent explanations in relation to evidence in the possession of the respondents and then negative it? That is to put the burden in the wrong place.

So, in the end, the $5 million approximate award of damages was displaced and we were given $100. That is, in our submission, a very serious injustice.

On the question of the differential in rates - and as to that there are plainly concurrent findings and plainly that is reckoned in millions of dollars. No other possible speculative innocent explanations could eradicate that loss, because that is something quite separate. It is plain that we suffered very substantial damages on that one basis alone. As to the productivity gains, if one supposes that there were innocent explanations not advanced, all that that would mean is that the totality of the damages would be reduced, but not that portion of it referable to the dishonestly inflated rates. We have established all of that and we have $100. In our respectful submission, that is a grave injustice. There is a point of importance going to the evidentiary burden in cases such as this. At the last we say that if we are wrong about all of that, then the Full Court should not have deliberated in its chambers without further argument on the question of whether to remit it to the trial judge.

GLEESON CJ: Thank you. Yes, Mr Martin.

MR MARTIN: Your Honours, as we apprehend the application, it is not put on the basis that if leave were granted it would give rise to any issue of general importance. It is rather put on the basis of injustice. In order to demonstrate that there is no injustice, I would like to step back from the morass of detail pertaining to the case because there is a very real danger that one can slip very readily into that morass of detail.

This was a mining contract and a schedule of rates contract. At the risk of being trite, what that meant was that my client's remuneration was calculated by multiplying the type and quantity of work done by the particular rate applicable under the schedule of rates.

As in most mining contracts, there were two types of work, basically. There was drill and blasting, load and haul. The drill and blast work, of course, involved doing drilling of different patterns to different depths of different diameters, and the application of different types of explosives to different depths, and there was a rate for each of those types of work. The load and haul work equally involved removing material of different kinds from different depths within the pit and taking it to different locations, depending on whether it was ore or waste, and the material had different swell factors. So it depended how much bank material you could get into a particular truck. Again, there was a rate for each and every quantity of the type of work done in respect of those materials.

The load and haul was only about 35 per cent of the revenue derived under the contract and yet it is within that area that virtually all of the present applicant's complaints are to be found, that is, only 35 per cent of the total contract, and that is an important consideration.

Your Honour, the situation was that the parties agree that the schedule of rates to be applied to each quantity was to be derived by the application of a computer program known as the FPC, into which there were a vast variety of inputs, including assumptions as to the haul roads, the gradients, the coefficient of friction which leads to tyre wear, estimates of costs, and so forth. The application of those various inputs produced computer output of the rate to be applicable to a particular type of work and spread the costs over the entire schedule of rates to apply to the work. That rate than applied to the work done.

Now, that computer program, of course, was only an estimate. It could be right or it could be wrong. The actual costs could be above or below the cost predicted by the computer, so that it was not a "cost plus" contract. Risk flew under this, risk applied under this contract. If actual costs were less, profits would be higher. If actual costs were more, profits would be lower. There was no guaranteed return of any kind under this contract.

What the trial judge found was that in respect of some only of the inputs into that computer process, that is, ownership costs of some items of plant in respect of the load and haul operation only, and in respect of some periods of time only, my client did not make a genuine estimate of its actual costs.

The extent of the difference between the genuine estimate and the cost which my client put forward was identified at trial. So that issue has been determined. But the big gap, the massive gap, is then: what is the consequence of that? The consequence of that is that one only of a very large number of inputs in respect of part only, some portions in time of some of the work, for some portion of the contract, produced rates that were different to the rates that would have been applied.

GLEESON CJ: Is it the fact that the answer to the questions involved in that gap is peculiarly within the knowledge of your client?

MR MARTIN: No, it is not, your Honour, and that is the point I was coming to. It is not peculiarly within the knowledge of my client because the computer program is commonly available. It was available to both parties. The contract contemplated that they would both work through that process so they could both identify and check. So what was required, and what neither the trial judge nor the Full Court had, was the identification of what a genuine estimate of cost would have been for the particular items of plant in respect of which complaint was made over the particular periods of time in respect of which complaint was made - that is an objective matter; that is not purely internal to us - what would a genuine estimate have been and, of course - - -

GLEESON CJ: Genuine estimate of whose costs?

MR MARTIN: A genuine estimate of our costs. But, of course, our costs were thoroughly ventilated. All the witnesses were cross-examined at length. We gave full discovery of our actual costs. So that matter was fully ventilated. What you needed to then do was to use that and say, "The big gap is not the identification of genuine estimate. The big gap is in the next step". The next step is: what different rates would a genuine estimate have produced, in respect of which work and in respect of which periods of time?

Now, that is a task that the current applicant embraced in its pleading as it pleaded that measure of damage, but then did not embrace in the evidence. It never attempted to address that issue in the evidence at all. Instead its case, at first instance, was entirely based on these things called the "profit forecasts". Now, there were at least two fundamental problems with those.

The first was that they included work done prior to the commencement of this contract, because my client had done work for the applicant under a different contract, but the profit forecast loaded in all that work in respect of the one document because no segregation was made. That is why the trial judge said, "You can't rely on these because they don't segregate out the work done under this contract". The other problem, of course, was that they were, as their name implies, forecasts. They were not a retrospective reassessment of actual profit. The third and fundamental problem was that they did not address the proper measure of damage. They looked at the total contract and provided, as my learned friend has said, a total profit estimate over the entire job.

Now, our breach was not earning too much profit. Our breach was in not making a genuine estimate in respect of some items of plant for some periods of time and that it applied mainly to the load and haul job. So to go then and say that, "Because you made this much profit, it follows that that is derived from your breach", misconceives the nature of the contract. It was not a "cost plus" contract, but the measure of damage propounded for below was, in fact, a "cost plus" measure.

McHUGH J: Mr Martin, what you have to look at is that in the findings of the trial judge your client was involved in a commercial fraud - not to put too fine a point on it, on the findings your client was a commercial crook - and now it walks away without having to pay any damages at all. There are two possible explanations for that. One is that the applicant's advisers were so incompetent that they did not properly present the case that would entitle them to damages having regard to the fraud that was perpetrated on them, or there has been a miscarriage of justice. Why should not this Court look at it?

MR MARTIN: Your Honour, there is a third explanation, and that is that the applicant's advisers were competent and gave competent advice to the applicant which elected to make a deliberate forensic decision to advance its case in a particular way. The case for damages put based on the profit forecasts produced a claim for some $13.2 million. The method adopted by the trial judge on his own, again a "cost plus" method, came in with a much lower figure of just under $5 million. A method that we say was the proper method, and the Full Court agreed, is entirely speculative because until you apply those rates into the program and take into account if you are going to do it retrospectively, you have to apply genuine rates across the board so that their other rates, on the evidence, may well have been low. If you redo the exercise, it is entirely speculative as to whether this applicant would have ended up in front or behind.

It has to be remembered the trial judge found, not challenged, that there was no evidence upon which he could conclude that the pre-contractual representations that resulted in entering the contract caused the applicant to suffer any loss because there is no evidence that they could have got this job done cheaper by anybody else or by doing it themselves.

The short answer is there is no evidence that loss has, in fact, been suffered by this applicant. There remains the possibility that the way in which the case was conducted was a deliberate forensic choice in order to maximise the return. If the other possibility that your Honour first posited is correct, that is incompetence, then this applicant will not be without a remedy and an injustice will not be done. Whilst that third possibility remains open, there is, in our submission, no reason why this Court should, as it were, allow for the possibility that there may have been a mistake and cure that mistake without inquiry as to its cause.

McHUGH J: But given the nature of the fraud that was found in this case, it is impossible to conclude otherwise than that this applicant has suffered a loss. Maybe there is no evidence - you may be right, maybe there is no evidence of it but - - -

MR MARTIN: With respect, it is not possible to conclude that unless you do the exercise, because if you redo it, you have to redo it completely, and you have to then put in a genuine estimate of plants across the board and redo what the computer would produce as the schedule of rates and apply that to the quantities moved at the time. Until you do that - - -

McHUGH J: But why do you not hold an evidentiary onus in respect of those other aspects of it? A fraud that has been found against you is in relation to this 5 per cent issue.

MR MARTIN: No, it is not, your Honour, with respect. The fraud that has been found against us is in respect of the failure to make a genuine estimate of plant rates. The plant rates do not dictate revenue. The plant rates are an input, one component only, into a very complicated revenue assessment program. They were plant rates in respect of part of the equipment only, for part of the time, for part of the job. To go from there and say, because you earned more than 5 per cent over the total job, is to equate this contract with a "cost plus" contract, which it never was, and is to apply an entirely fallacious measure.

McHUGH J: There is no attempt to challenge the findings of fact that your client was engaged in a fraud?

MR MARTIN: Well, not on a special leave application, but if leave were granted, we would seek special leave to cross-appeal.

GLEESON CJ: In a matter in which there are concurrent findings of fact.

MR MARTIN: Your Honour, there is antecedent for that. There is a contractual construction question that we think is certainly alive and in respect of which we would seek special leave to cross-appeal. While I am speaking about, perhaps, the consequence of an appeal, in order to understand the issues I have been talking about one needs to understand just how and what the nature of the fraud was, in the context of the alleged fraud, the context of the job as a whole, and the causative nexus between those matters and the damage alleged to be suffered. You just cannot do that on a short, piecemeal basis. You need to look at the entirety of the evidence with respect to the job.

My learned friend's estimate of an appeal of less than a day I find extraordinary. The appeal in the Full Court took two weeks. I am not saying this appeal to this Court would take that long but it would be, in our submission, a week or more in order to fully understand these very complex issues.

GLEESON CJ: No, I would not be a week or more. We are in charge of that.

MR MARTIN: Your Honour, there are extremely complex factual issues in respect of each item of plant, so that you need to look at what was the genuine estimate in respect of this particular item of plant, when and how was this item of plant used - - -

GLEESON CJ: Just a minute. In order to succeed in his appeal all that Mr Gilmour has to do - put to one side the possibility that Mr Gilmour persuades us that the trial judge was right. If the trial judge was wrong but Mr Gilmour still presses his contention that the Full Court was wrong, all he has to do is demonstrate to us that on the evidence his client was entitled to more than $100, and he gets a new trial, does he not?

MR MARTIN: Yes, and in order to - well, no, with respect, he gets whatever the evidence sustains.

GLEESON CJ: No, I thought we had it clear that he was not asking us to reassess the damages assuming the trial judge is wrong.

MR MARTIN: Your Honour, that would fall foul with respect to long-established principle in this Court, to the effect that, if there is a proper measure of damage and the lacuna of evidence of the claimant for damages is of that party's making, this Court does not give you a chance to do it again - that is what Chief Justice Latham said in Luna Park - if the gap is there. That is why we would need to go through the evidence to see if the gap is there.

GLEESON CJ: That raises the question of the evidentiary onus that has been mentioned.

MR MARTIN: Yes. Well, the claim for damages is the current applicant's claim.. It plainly carries the evidentiary onus of showing that it established a loss and what the proper measure of that loss was.

McHUGH J: But was not there findings by the trial judge which were not overturned on appeal that between February 1994 and June 1995 your client made some 2.27 million profit which you treated as profit. Why is not, at the minimum, the applicant entitled to that, subject to you showing or disengaging what is due to the fraud and what is not due to the fraud?

MR MARTIN: Your Honour, with respect, that does misconceive the onus. We always did this job on the expectation that we would derive a profit from it. To say that we derive this particular profit from the total job over that period without looking at losses in previous periods, without segregating out the work that was done to generate that profit, so that you identify the work the subject of the alleged overstatement of plant rate, is a meaningless figure, with respect.

McHUGH J: But if you engage in fraud and you make a gain upon it, surely there is at least an evidentiary onus on you to show what is not attributable to the fraud.

MR MARTIN: With respect, we would quarrel with that proposition.

McHUGH J: You might, but if it is not the law, then it ought to be the law.

MR MARTIN: Your Honour, a party who comes to court claiming fraud of this kind cannot, with respect, say, when there is an obvious means of calculating the loss, if any, which it has suffered, "I am going to throw the ball in the air and say, `You made this much profit over the entire contract. I accept that it is not a "cost plus" contract and that my claim is in respect of only part of the work over part of the time for some of the equipment, but you have to tell me what it is'". That, with respect, is not how our forensic system works.

McHUGH J: I am not sure about that. In Watts v Rake Chief Justice Dixon said once you show the injuries to the plaintiff are attributable, on one view, to the defendant's negligence, then it is up to the defendant to show that certain aspects of those injuries just are not attributable to you.

MR MARTIN: Your Honour, that starts from the starting point that injury has been demonstrated, so that the plaintiff gets in the witness box and says, "I was run over. I was hurt. I went to hospital for such and such a time". This applicant never got to that point, because until you do the computer exercise, you do not know whether this applicant is going to be in front or behind as a result of redoing the rates on the basis of the genuine estimate. So the Court cannot start from the assumption of any loss until that exercise has been done, and it is an exercise that the parties contemplated by their contract and there is no reason at all why the applicant did not adduce evidence of that kind. It could have been simply and easily done and then you reapply it to the quantities which were agreed between the parties and that is the number, and you take that from the number that was paid and you see whether there is a plus or a minus.

Instead they come along and said, "We want $13 million". That was their choice. They failed on that before the trial judge. They did not press that method on appeal to the Full Court. On appeal to the Full Court they did not cross-appeal to the effect that some other method should have been adopted. They did not put any submission to the effect that the matter ought to be remitted for further inquiry to the Full Court, despite that being squarely debated before the Full Court. Their strategy having previously failed, they now come along and say, "Now we want the High Court to fix it all up because our forensic ploy hasn't worked".

McHUGH J: If that was their forensic ploy, then it will not work in this Court either. It is a question as to whether or not the Court should not have a look at it. You may well prove to be right.

MR MARTIN: Your Honour, our submission is, that in the absence of a point of general importance, it is a very peculiar contract when - - -

McHUGH J: But is it not a point of general importance as to whether or not there is, at least, an evidentiary onus on a person in your client's position to show what damages or what profit that you have made is attributable to the fraud and what is not? You may say none of it is. I know that you say, ell, they have to show they have been deprived of some - - -

MR MARTIN: Your Honour, our submission in response to that is that the complexities of this case, the factual intricacies of this case, are such that it is unlikely that one would be able to extricate a point of that kind of general application, because you would need to revisit the entire way in which the trial was conducted, claim and cross-claim, look at the nature of the evidence, look at the submissions that were put, look at the strategy of each party both at first instance and on appeal, before you could come to a conclusion that there had been a failure on our side to advance evidence of the kind that we ought to have advanced. That is a complicated and time-consuming exercise in respect of a trial that occupied three and half months and an appeal that occupied two weeks.

McHUGH J: Well, Mr Martin, I have historically taken a strong stance about people taking points that were not taken at trial or conducting cases in a different way, but when you have findings, and concurrent findings, of fraud as have been established in this case and then the victim is said to have not suffered any loss, it strikes me it is a matter that the Court ought to have a look at it.

MR MARTIN: Your Honour, before I sit down, because I see my time has expired, can I just say that the reason we are here this year instead of last year is the claim for equitable compensation. The case has always been conducted at all levels by the current applicant on the basis that the measure of damage for breach of contract and the measure of damage for breach of fiduciary duty was identical. Now, for the first time, they seek to argue otherwise.

The problem with that argument, if it were the subject of leave, would be that we would first have to entertain the question of whether there was, in fact, a breach of fiduciary duty, that being an issue on one view unresolved by the Full Court, on our view was resolved adversely. But the question of whether there was a post-contractual fiduciary duty we say is an extraordinary conclusion where the contract defined the respective rights and obligations. That would be the first area to be addressed. Then there would have to be an application to amend to plead equitable compensation. That application to amend would, in turn, give rise to questions of whether or not there was evidence that could have been led had we been on notice that a claim for equitable compensation was to be advanced. That, in turn, would require a review of all the evidence that was led.

So that in that respect, if that is to go forward, then again what we would find is an applicant totally re-jigging its case in this Court as compared to the way in which it has previously been conducted at all levels and in a situation in which this Court would be called upon to evaluate for the first time important issues with respect to fiduciary duty and the consequences of alleged breach of that fiduciary duty. In our submission, that is just entirely inappropriate.

GLEESON CJ: Mr Gilmour, that last point that was made by Mr Martin, your claim was a claim for breach of contract, was it not?

MR GILMOUR: No, it was a claim for both breach of contract and breach of fiduciary duty. Ineloquently perhaps but obviously enough in the pleading we claimed damages under a number of discrete heads, one of which was breach of fiduciary duty, so it was described as damages when more accurately it ought to have been described as compensation that we were seeking, but it is plain enough that that is what we were seeking. It is in the pleading. The judge had no difficulty in understanding that. He made findings that there were breaches of both contract and fiduciary duty and he said that his assessment, which he proceeded to quantify by reference to the breach of contract - he said that the measure would be the same in relation to the breach of fiduciary duty.

We do not seek to assert, as Mr Martin has submitted, that the measure would be any different. We simply say to the High Court that it may well be that as between a breach of contract, even one where there is an element of dishonesty on the one hand and a breach of fiduciary duty on the other hand, that there may be a greater evidentiary burden on the defendant. In the end maybe there is not. Perhaps Watts v Rake and Henville v Walker - breach of contract and breach of fiduciary duty, the burden is the same once you have established breach and the fact of loss. That is the only point.

GLEESON CJ: The breach of contract was a breach of a contractual obligation to act in good faith, was it not?

MR GILMOUR: Yes, it was. The trial judge, and we frankly, and the Full Court preceded that the extent of the obligations was coextensive as between the two of them.

GLEESON CJ: Yes, thank you.

McHUGH J: What do you say about the point that the way the case was conducted was a deliberate tactical choice made by your client?

MR GILMOUR: Your Honours are at a great disadvantage in a case forming a trial of three and half months and an appeal of nine days, but my learned friend, Mr Martin, simply put to your Honours what he put so eloquently to the Full Court, which was a theoretical approach to the quantification of damages which was never pleaded, never run at trial, and in the same way as the supposed innocent explanations were raised from the Bar table, that was an approach to damages that was theoretically put to the Full Court as the only way to do it.

Now, in a case involving allegations that the defendant had made more than 5 per cent profit and that that profit was dishonest profit and we were entitled to have it back, the trial judge was quite entitled to approach the question of damages in the way that he did, which was to isolate that extra profit and then look at what the defendant said were innocent explanations for it. He heard all that evidence. He rejected 95 per cent of it. He gave them - - -

McHUGH J: All except two explanations - - -

MR GILMOUR: He rejected almost in entirety the explanations about productivity gains. He gave them an allowance of half a million. He found that the profit they made was about $8 million. He found the profit had the applied 5 per cent to costs, under the contract would have been about $3 million - I am using broad figures - so there is $5 million of extra profit. He looked at the evidence advanced by both parties as to the explanations for the extra profit. Our friend said we inflated the plant department rates because we had good legitimate reasons to do so. All rejected. They said we had productivity gains running to millions of dollars. As to that, rejected, other than as to half a million. That was a logical and sensible and just approach to the assessment of damages.

The FPC calculation and the difficulty and the complexity of that we heard, for the first time, when our friend was on his feet in the Full Court. The Full Court, in its reasons, acknowledges that that was not run before the trial judge, although it thought it was a nice way to go about the assessment of damages. The flaw in the premise of what you have heard from my learned friend is that that is the only way to skin the cat. With respect, there were other ways and there was a very logically cogent and just way adopted by the trial judge.

GLEESON CJ: In this matter there will be a grant of special leave to appeal.

AT 11.49 AM THE MATTER WAS CONCLUDED