Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd P60/2001 [2002] HCATrans 432 (10 September 2002)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Perth No P60 of 2001

B e t w e e n -

PLACER (GRANNY SMITH) PTY LTD

Appellant

and

THIESS CONTRACTORS PTY LTD

Respondent

GLEESON CJ

McHUGH J

KIRBY J

HAYNE J

CALLINAN J

TRANSCRIPT OF PROCEEDINGS

CANBERRA ON TUESDAY, 10 SEPTEMBER 2002, AT 10.16 AM

Copyright in the High Court of Australia

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

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

GLEESON CJ: Yes, Mr Gilmour.

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

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

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

GLEESON CJ: Yes, Mr Gilmour.

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

GLEESON CJ: Are they opposed, Mr Jackson?

MR JACKSON: No, your Honour.

GLEESON CJ: Yes, you have that leave.

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

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

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

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

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

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

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

MR GILMOUR: Yes.

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

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

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

That would enable a damages figure to be assessed -

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

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

GLEESON CJ: Yes.

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

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

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

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

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

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

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

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

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

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

GLEESON CJ: In all events, coming back to this passage on page 1171, are you inviting us to deal with the case on the basis that there was evidence of a kind about which the Full Court speculated in paragraph 198, or should we deal with the case on the basis that we can disregard the possibility that there was such evidence?

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

GLEESON CJ: Yes, you take your own course.

MR GILMOUR: Yes, thank you.

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

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

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

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

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

GLEESON CJ: All right.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

MR GILMOUR: Correct.

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

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

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

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

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

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

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

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

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

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

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

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

CALLINAN J: But did you get those on discovery?

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

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

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

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

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

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

who was junior counsel for Placer on the appeal -

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

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

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

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

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

MR GILMOUR: Correct.

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

MR GILMOUR: Correct.

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

MR GILMOUR: Correct.

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

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

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

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

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

MR GILMOUR: Yes.

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

MR GILMOUR: Yes.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

McHUGH J: I appreciate that.

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

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

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

MR GILMOUR: Yes.

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

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

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

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

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

MR GILMOUR: That is per hour, per truck.

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

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

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

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

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

MR GILMOUR: Yes.

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

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

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

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

McHUGH J: What page is that, Mr Gilmour?

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

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

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

McHUGH J: Yes.

MR GILMOUR: Then 31:

The clauses that provided for rates to be reviewed -

the last line -

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

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

And in the last few lines of paragraph 32:

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

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

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

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

and then note that you -

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

but rather put it under the rubric "of good faith".

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

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

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

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

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

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

In compiling this report, he:

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

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

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

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

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

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

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

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

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

HAYNE J: Yes, but were they?

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

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

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

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

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

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

CALLINAN J: Page 532?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The burden was on Placer to prove such profits.

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

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

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

GLEESON CJ: Why would it not be possible?

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

With respect, your Honours, it was an extraordinarily complex proposition that was ventilated from the Bar table in the Full Court and picked up by the Full Court. Actually, what we hope to persuade your Honours is that in looking at the trial judge's method, the difficulty with the project forecasts identified by his Honour was answered by other evidence, but I will come to that. That is our primary submission.

Your Honour the Chief Justice asked me about a pleading in relation to the differential and I just happen to have passed it when I was looking at something else, so if I can take your Honours to that, appeal book 120. Perhaps it would be convenient for me to deal with the way the issue of damages and the way the matter was put generally was pleaded. You see at 120, paragraph 95(xiv) and this is part of Placer's counterclaim, it was pleaded that:

For the period of January 1994 to June 1995 the difference between the plaintiff's internal plant department rates and the amount it charged the defendant on the basis of the said base rates was $2,713,940 plus 5% for profit.

GLEESON CJ: Now, was that admitted.

MR GILMOUR: That is admitted at page 192 at paragraph 80(c).

GLEESON CJ: So one of the submissions that you make is that you are at least entitled to $2,713,940 plus 5 per cent?

MR GILMOUR: Yes, although, without - I was hoping not to necessarily have to take your Honours to them. We have set it out in our summary of argument. Other evidence and findings that shows, for example, there were other amounts of in excess of $1 million which disclosed that differential was of a very significant amount and those are concurrent findings.

GLEESON CJ: Where is the admission on page 192?

MR GILMOUR: Paragraph 80(c).

GLEESON CJ: Thank you.

MR GILMOUR: Now, your Honours, what that admission highlights is what I said to your Honours earlier, namely that at the core of Thiess' defence to the counterclaim was its pleaded assertions that it was entitled to the differential, that it had not breached its fiduciary duty or its contract with Placer and it advanced a whole range of reasons, which was the subject of weeks of evidence, in order to attempt to justify why it inflated those rates. All of those explanations, all of them, were rejected by the trial judge and the trial judge found that the genuine estimates which should have been proffered by Thiess were those provided to it at site by its own plant department. But at this point, Thiess is saying, "We were entitled to that".

One sees something else from that pleading at 80(c), your Honours. It goes on to say:

but it says that overall its profits from January 1994 to June 1995 inclusive were close to 5% of its costs -

Now, a very important matter arises out of that. Given that the Full Court, adopting submissions from the Bar table that there could have been productivity gains from elsewhere, the Full Court said productivity gains were only ventilated in relation to 1993; what about the rest of the contract? You see here that on the basis of its own pleading, Thiess was saying it had made no productivity gains or any other gains of any significance because it said that its profits, as that is understood under the contract, were close to 5 per cent of its costs.

So, in the way the case was run by Thiess, they closed off all of 1994 and up to June 1995 when the contract was terminated on the basis that they said we were running pretty close to 5 per cent on costs but we were entitled to the differential of 2.7 million. That matter is amplified when one has regard to paragraph 96 of the counterclaim, which again starts at page 120 of the papers in volume 3. That pleads Placer's damages. The way that the calculations ran - there is a whole series of them. I do not need to take your Honours to the first one because the others are the same in principle. It starts off with the total of the progress claims paid. That is the revenue received by Thiess, 10.6 million or so:

Less 10.5% being the plaintiff's estimated profit it would make under the GSM Contract as at the time it entered into the contract to reflect the plaintiff's bona fide estimate of its costs

What that does is it reflects the actual profit made by Thiess because it had a margin of 10.5 per cent rather than 5. Then at (iii):

If a bona fide estimate had been used for the calculation of rates the plaintiff would have received $9,554,184 -

and so the difference between the total of progress claims and the bona fide estimate plus profit was 643,000. At the very outset in its pleading and throughout the case, Placer sought to isolate this additional revenue beyond the plant rate plus 5 per cent and what actually it was that Thiess had received.

In respect to that pleading as a whole, asserting that it had received more than it should have done under the contract, the relevant pleading again starts at 192 and is paragraph 81. Paragraph 81(a), following upon a denial of paragraph 96, says further:

(a) that the defendant relied on its own knowledge and experience in agreeing the base rates in July and August 1992 for the years 1992 to 1995 -

What that encapsulates was the primary defence to the counterclaim of Thiess which was, "We are entitled to the differential because you agreed the rates. The rates are reasonable and we didn't have to give you the internal plant department rates".

GLEESON CJ: What is the paragraph in your written submissions where you pursue this point, taking on the other examples in addition to the $2.7 million plus 5 per cent?

MR GILMOUR: Perhaps I could ask my junior to find that and tell your Honour. I cannot tell your Honour just immediately offhand.

GLEESON CJ: Is one of the arguments you put that in this contest about whether you were entitled to the $4.7 million that you were awarded by the primary judge, the Full Court appears to have lost sight of the fact that it was not in dispute but there was an amount of about $3 million by which the rates charged by Thiess were in excess of their actual costs?

MR GILMOUR: It is always difficult to make that submission about a Full Court but that is our submission, that at least $2.7 million. We just say that is one example because that was only part of the contract that that figure referred to. The findings are concurrent as to the breaches, their nature. Paragraph 153, as I have pointed out, demonstrates the Full Court understood we paid too much.

GLEESON CJ: I just wanted to point out to you that that submission covers more than half the amount in dispute.

MR GILMOUR: Of course.

GLEESON CJ: I would not pass too lightly over it.

MR GILMOUR: No, and I do not intend to, thank you, your Honour. It is indeed something that I think I have put to your Honours repeatedly, that the issue about productivity gains and cost underruns which became the spotlight in the Full Court was not the spotlight in the trial. The spotlight in the trial was that they inflated the rates and that the results were startling calculated in monetary terms, that they ran into millions of dollars. None of that can be altered by any questions turning on productivity gains or cost underruns other than where you reach a prima facie measure of damages. It is then open, in our respectful submission, for our friends to say, "It's true that we paid too much. We inflated the costs but we actually made innocent extra revenue from productivity gains and so on. We plead that and we prove that". Indeed, they did plead that, your Honours. They did plead that they were entitled to more than 5 per cent and why.

I took your Honour to paragraph 96, and I was taking you to paragraph 81 at page 192. Just while in passing, your Honour the Chief Justice, it is paragraph 19(c) of our summary of argument. That is one place at least where you will find reference to those matters. So in answer to our claim for damages on the counterclaim, Thiess at 81, page 192, said (a), in effect, "We are entitled to the differential. You agree that these are the rates." At (c), they pointed out, as was the fact:

that the new contract made in or about August 1992 and the GSM Contract permitted the plaintiff to earn profits in excess of 5% on its costs.

We accept that. At (d) it provides:

that reviews of base rates were to be made with reference to the plaintiff's productivity in relation especially to ground conditions and if either party wanted a change in the rates it was incumbent upon it to say so and to justify the change;

That was in a sort of roundabout way saying, "We made productivity gains; we are entitled to keep them" - it did not at that point specify what they were - and likewise at (e) raise the issue of savings and costs. It said:

that neither the new contract nor the GSM contract entitled the defendant -

that is Placer -

automatically to the full benefit of any savings in costs the plaintiff was able to achieve.

So, fairly and squarely, on the counterclaim, in answer to our claim for damages, they said, one, "Entitled to keep differential"; two, "We can get the benefit of productivity gains and cost savings", but at that stage did not identify what they were.

HAYNE J: Can I detain you a moment at paragraph 96 of your pleading - - -

MR GILMOUR: Yes, your Honour.

HAYNE J: - - - on the particulars. I do not understand item (ii) under each of the rubrics. Is item (ii), "Less 10.5%", et cetera, taken to account at any point in the mathematical calculations that lead to item (iv), namely, "Difference between total of progress claims and bona fide estimate"?

MR GILMOUR: Yes, we do, your Honour. You will see that in each case that the percentage figure that is deducted is different. It is 10.5 at 1(ii), it is 16.5 at 2(ii) and 16.21 at 3(ii). Now, those figures derived from the project forecasts. That is the documents that I told your Honours about earlier, namely the internal management reports where Thiess projected for the purposes of informing its senior management, the profit that it was going to make on, in this case, the Granny Smith Mining contract.

Now, in a case where Thiess was only entitled to 5 per cent on its costs was rather illuminating, to say the least, that it was prognosticating profits on costs well in excess of that, and because the project forecasts were based on revenue based on rates, based on estimated costs, Placer, for the purpose of the trial, took the view that in order to arrive at the amount of allowable profit - that is, cost plus 5 per cent - it would first of all identify the revenue - that is (i), "Total progress claims paid to the plaintiff". From that it would deduct the projected profit which Thiess had set out - that is (ii). By doing that you would arrive at its true costs, which is (iii). You would then add 5 per cent to those true costs and you would deduct that figure from the profit which had been projected and that would be the excess profit.

HAYNE J: Thus, item (iii) is derived by working backwards from Thiess' internal project forecast of profit to be derived for a future period.

MR GILMOUR: Correct. With respect, there was nothing wrong with that approach in principle because all that it was doing was identifying four necessary elements in the equation to arrive at the figure for prima facie damages, namely revenue. Total profit, allowable profit, which was calculated from the figure of costs which had been arrived at - the allowable profit being 5 per cent on costs. You then take that figure of 5 per cent on its genuine costs from its projected profit and that gives you the extent of its projected earnings.

HAYNE J: Be that as it may, was there evidence at trial of the internal plant department rates of Thiess for each period the subject of dispute?

MR GILMOUR: I do not know the answer to that immediately, your Honour. What I can say is that there was evidence of the internal plant department rates applicable to the items of plant and equipment, which were put in issue by Placer on the counterclaim, which is the relevant - - -

HAYNE J: So, in respect of each item in respect of which you said there was an overcharge, the internal plant department rates were given in evidence.

MR GILMOUR: Yes, that is the position.

GLEESON CJ: And they must have been known to you before trial to enable you to make the allegation in paragraph 95(xiv).

MR GILMOUR: Yes, that must follow, your Honour. While I am dealing with the pleadings, your Honours will note at 192 that in its defence to the counterclaim that Thiess pleaded by reference at paragraph 80(a), paragraph 32. Paragraph 32 your Honours will find at page 175 and following. It provides:

The plaintiff admits that its representatives did not state in terms that it was deriving profits exceeding 5% on its costs, but says -

a number of things. At (a), in about the middle of that paragraph:

In 1993, the actual productivity achieved were significantly higher than the estimated productivities used to derive the base rates for loading and hauling and drilling and blasting.

So that is a positive averment by Thiess which, when you take together with its pleading concerning the years 1994 and 1995, effectively covers the field for the duration of the contract. So no productivity in 1994/1995 - no productivity gains, at least - and in 1993 there were productivity gains on both load and haul and drill and blast. At 176, at (d), it further pleads that:

changes in plant, volumes of material and improved productivity during 1993 resulted in fluctuations in the percentage profits derived by the plaintiff;

And at (j), repeating what it said in the pleading that I took you to before, it says at 177(j):

from January 1994, the profits derived by the plaintiff on its costs were reasonably close to the agreed profit percentage on turnover.

So all of that, taken together, means necessarily that Placer's case on the counterclaim was, so far as concerned, productivity, that it raised it as an issue - we did not raise it as an issue; it was not for us to raise it as an issue, Thiess raised it - and they said, "We made productivity gains on excavate, load and haul and drill and blast in 1993, but our profit was pretty close to 5 per cent on cost for the balance on of the contract. Implicitly, no productivity gains or losses.

GLEESON CJ: Now, still staying with those assertions made in the pleadings in subparagraph (xiv) and in paragraph 96, and seeking to relate them to what the Full Court said on page 1159, in paragraph 165, is it the case that the information referred to in paragraph 165(a) and (b) was known to you and was what enabled you to calculate the amount referred to on page 120, paragraph 95(xiv)?

MR GILMOUR: That must be right. I think, your Honour, I did not participate in that calculation or the pleading, but - - -

GLEESON CJ: Well I did want to follow this through.

MR GILMOUR: Yes.

GLEESON CJ: You actually knew the information contained in paragraph 165(a) and (b)?

MR GILMOUR: The answer to that has to be yes, your Honour, yes.

GLEESON CJ: All right. Well then, what was to stop you doing, what was referred to in subparagraphs (c) and (d), because once you have done that it is just arithmetic from thereon in, is it not?

MR GILMOUR: Your Honour, it is, as I said before, one way of looking at the matter; it is a very complicated way of looking at the matter, because it would have required the recalculation of thousands and thousands of simulations across three years of a mining contract, because, as I said before, at any one part of the pit you have different rates for different equipment involving considerations in addition to the operating costs of the equipment, namely the load haul distances, the conditions and so on and so forth.

GLEESON CJ: What I am trying to work out is whether, apart from its being very tedious, it was within your power to do that, or whether it doing that required access to information that was peculiarly available to Thiess?

MR GILMOUR: I will need to take further instructions, but I am reasonably certain, your Honour, that the information would have been available to Placer, namely the items are planned in respect for which the rate was used. Those were specifically pleaded by Placer and the relevant plant department rate applicable to those, I am reasonably certain, would have been available to Placer, on discovery.

GLEESON CJ: Yes, but it is (c) and (d) I am more interested in at the moment. I thought that we have agreed that (a) and (b) were available to you and, indeed, must have been used by you for subparagraph (xiv).

MR GILMOUR: Your Honour, I would need to take instructions in relation to (c) and (d), as to whether the other information, which forms the parameters of the FPC calculation, bearing in mind that that only goes to excavate load and haul, it is the only area in which the FPC is used, and (d) deals with what is said to be:

notional contractual rates for the other items of plant -

KIRBY J: During argument in the Full Court did the Full Court signal that this was, in its view, the way in which you should have proceeded to present and then calculate the damage?

MR GILMOUR: This was the subject of debate, your Honour, it was raised by counsel for Thiess. When I say "it", not in the precise terms in which the Full Court eventually formulated the matter, but broadly speaking the use of an FPC calculation in respect of excavate, load and haul was raised before the Full Court. So, as a broad proposition of the way that it was said for the first time that it should have been done, the way that the Full Court has formulated it here is again broadly the way that it was put.

I am obliged to Mr Duncan. He refers me and I can refer your Honours to page 1160 in paragraphs 167 and 168. At 167 the Full Court deals with the process known as the "FPC simulation" described it as:

highly complex and subtle, which has regard to manifold factors, and involves many possible permutations.

It identifies, correctly, that it was not a method that the learned had utilised and it was not a matter that was ventilated, of course, before his Honour by either party. It was not said by Thiess that that was the way that damage should be assessed.

KIRBY J: Yes, but the clue to the thinking of the Full Court is in that adverb "accurately". They appear to have thought your approach did not accurately calculate the damages and you were in this respect the claimant and you bore the onus and if you do not prove it accurately and a court is left in uncertainty, the thesis is that you have not proved your case.

MR GILMOUR: That is, with respect, not a proposition of law with which we would agree, that a claimant requires to prove its damages accurately if that means absolutely precisely.

KIRBY J: In a case of this enormity it is a bit unreasonable to expect the judges to get out their calculators.

MR GILMOUR: All that happened, your Honour, was that we satisfied his Honour the trial judge that by reference to the contractual theory and the revenue which Thiess was entitled to have obtained that there was a way of doing it, which, absent explanations from Thiess, did isolate extra revenue above 5 per cent, which did call for explanations from Thiess, which explanations Thiess did plead and sought to establish by evidence, and largely failed, and in that way his Honour was satisfied in reasonable terms of thereby establishing the measure of damages.

The Full Court was satisfied. For example, at 177, that if our submission were made good, namely, that Thiess did conduct its case in that way, then the trial judge's was open. So it is, with respect - and I hope this is not too loose language, your Honours - it is just another way of the skinning the cat to do it the way that we did it.

KIRBY J: I must say in the opening of the paragraph at page 165 no argument would have arisen had you proved your damages in the following manner so it is not stated that that was the only manner, just that no argument would have arisen if you had done it that way.

CALLINAN J: There are often alternative ways of proving damages and some ways may produce more in damages than others but there is often, particularly in a case of this kind involving breach of fiduciary duty, to put it at its lowest - - -

KIRBY J: It is the word "accurately" that the Full Court obviously was concerned about.

CALLINAN J: You say it sufficient for your purposes if you prove more than nominal damages you are entitled to an award and you certainly did that/ Is not that what you say?

MR GILMOUR: We say we certainly did that. We say we did more than that. We say we identify it within the proper construct of the contract, the excess revenue, that Thiess obtained. The issue was not did it obtain the excess revenue but what was the explanation for that excess revenue. Even Thiess put it that way in their opening remarks to the trial judge.

GLEESON CJ: You say, as I understand it, that once you made good your argument which was in contest that they were obliged to charge the internal plant department rates then you had established that you made overpayments of about $3 million and the question then was the precise amount by which you made overpayments. The judge worked that out in one way. The Full Court said the way it should have been done was paragraph 165 but I am trying to work out where we are heading.

We could - if we were to accept that the trial judge's method of doing it was, in the circumstances, an acceptable method, then we would simply restore his decision. If, on the other hand, we accepted the Full Court's approach then we would dismiss the appeal but if we were to say, "You showed at least about $3 million and it ought to go back for a retrial" what would you be asking the judge on a retrial to do different from what was done by the original trial judge?

MR GILMOUR: Our primary submission, your Honour, is that the trial judge got it right.

KIRBY J: Yes, we know that. That is item (1). That was the first possibility, but you have been asked to hypothesise the third possibility. Item (2) is we simply confirm the Full Court. Item (3) is, we say, that we take the criticisms which the Full Court gave of the way in which the primary judge calculated and that the solution was not then to say that you had failed to prove your case, but especially having regard to the matters which were found to say that that ought to have led to an order for retrial on the issue of damages. Now, the question is, how would the primary judge - the new primary judge - approach that matter.

MR GILMOUR: The issue of damages. The assessment. So long as we had the liberty to identify particular evidence and to rerun the calculations postulated by the Full Court then that is the evidence that, on viewing it in that way, we would be required to run our case on assessment.

KIRBY J: Now, that seems to me to be conceding the matter that I have been trying to get out of you like dentist extracting a tooth, that on that third possibility you would be confined to the transcript - and the evidence, rather. The evidence. It may be that there would be an attempt to present the evidence in a different way in order to fit it into paragraph 165.

MR GILMOUR: If by that your Honour means that the information acquired, for example, to perform the FPC simulation calculation it would have to be evidence that was before the trial judge.

KIRBY J: You say you would have to call new evidence based on the factual material that was put at the first trial or not?

MR GILMOUR: What the Full Court described as the "manifold factors" in paragraph 167. What I am not certain about, your Honour, is whether that additional information which one requires for the excavate, load and haul calculation was before the trial judge.

GLEESON CJ: Is it your argument that even if the Full Court were correct in their criticisms of the approach taken by the trial judge, bearing in mind that it was uncontested that there were substantial amounts, in the order of about $3 million, overpaid by your client and bearing in mind the uncertainty revealed on the part of the Full Court themselves as to what was and was not in the evidence, the proper order for them to have made was to send the matter back for a retrial?

MR GILMOUR: Viewed in that way, yes.

GLEESON CJ: It would then be in the discretion of the trial judge to decide what further evidence should be part of it.

MR GILMOUR: I propose now to turn - having considered the way the trial judge approached the question of damages, to look at the way that Placer pleaded its case and, in part, I have already done that, but if I can take your Honours to 1155 - that will be in volume 5 - at paragraph 155 and following. That is where the Full Court helpfully encapsulates the relevant pleading by Placer and the calculations required in relation to it. So at 155 you have paragraph 96(b). I took your Honours earlier to 96(a). Putting it broadly, 96(b) deals with isolating the amount over 5 per cent of additional revenue. The Full Court said:

That pleading sets out the correct principle on which Placer's contractual damages fall to be calculated.

We take that to be no more than the Full Court agreed that that was a method of approaching it with the assessment of damages.

At 156 the Full Court summarises, if you like, in a helpful way what is set out at paragraph 96(a) of our counterclaim which just sets out the steps, namely, firstly to:

Determine revenue from progress claims.

That is a figure which was unexceptional -

(2) Determine Thiess' profit, by using the percentage profit disclosed by the Project Forecasts.

Now, that is what I explained to your Honour Justice Hayne when you took me to the pleading and that is what is referred to there.

(3) Deduct profit -

that is total profit -

from revenue, so as to derive costs.

(4) Apply a 5% margin to costs to derive -

what he calls -

allowable profit.

That is, if you like, the contractual profit and you take that from the total profit and you get what the Full Court correctly describes as damages.

Now, if I can take you to volume 4 of the appeal book, page 783, and that, your Honours, is the final page where his Honour deals with the question of Thiess' profit forecasts or project forecast documents. It actually starts at page 774 under the heading "Thiess' profit forecasts". So what his Honour is here dealing with is what the Full Court refers to at paragraph 156 at item (2), namely the identification of Thiess' actual profit by using the project forecasts documents. You have the finding at 783, lines 16 and following, this:

Accepting, as I do, that profit was deferred from the 1989 contract to the new contract, it must follow that Thiess' project forecasts and contract valuations cannot be relied on -

importantly -

(without adjustment) as providing an accurate assessment of the profit Thiess expected to earn from the new contract alone.

GLEESON CJ: May I interrupt you to ask you a question of factual detail, Mr Gilmour. In their internal accounting did Thiess account in any way for the difference between their plant department charges and their costs as represented to you?

MR GILMOUR: The answer to that is yes, they did, your Honour. Initially, they did not, but in March of 1994 Thiess created an account known as the plant variance account.

GLEESON CJ: Plant variance account.

MR GILMOUR: The learned trial judge deals with that at page 839 and following. If I could conveniently take your Honours to that.

GLEESON CJ: Well, do not let me take you out of the order of your presentation. It just occurred to me that - - -

MR GILMOUR: It is not unhelpful, your Honour, to what I was going to put. So at 839 his Honour deals with what he heads, "The Plant Variance Account". He says:

The account was credited with the difference between the income derived from the plant rates charged to Placer and the plant rates charged by the internal plant department to the project.

GLEESON CJ: And what was the ultimate amount standing to the credit of the plant variance account at the end of the project?

MR GILMOUR: Your Honour, there is not a final figure, but can I take you to page 841, and at line 35 and following:

The calculations carried out by Mr Parsons in February 1994 showed that the revenue derived by Thiess from the differential plant rates was some $160,000 per month.

Mr Parsons was, I think, the contract manager for Thiess.

GLEESON CJ: How many months did this contract last?

MR GILMOUR: The contract ran from August 1992 to June 1995, but we do not contend that the evidence amounts to it being at that rate for all of that time. It cites part of Parsons' evidence:

"There is a difference between our contract rate and what the internal plant department is charging us and, yes, there's money there."

Then at page 842, at line 30, the evidence from two other Thiess witnesses: Mr Zuvich, who was one of the employees on site, and Mr Moore, who was an accountant, I think, on site. He says, talking about differential:

Consistently with this, both Mr Zuvich and Mr Moore, as successive Project Managers regarded funds standing to the credit of the Plant Variance Account as profit . . . Mr Moore treated the balance as profit.

Then at 843, his Honour says at line 16:

The differential was then running at about $220,000 per month, of which, Mr Parsons said, $40,000 per month was intended to cover the plant department administration costs and the Belmont workshop. Neither of those costs was properly recoverable under the contract -

so he rejected - there was that explanation, and said:

Mr Parsons did not attempt to explain what the balance of $160,000 per month was intended to cover. He said simply that:

"As far as we were concerned, we had contract plant rates."

That was the tenor of his evidence throughout. That was, I think, in answer - but it is only for part of the contract and there was no record kept by Thiess as such prior to 1994.

HAYNE J: But was the document, the ledger, which recorded this plant variance account in evidence before the primary judge?

MR GILMOUR: I am told by Mr Duncan that there was evidence from Mr Parsons as to the extent of the plant variance account. I am told by Mr Duncan that there were ledgers discovered, and I do not know whether that means they got into evidence, but the summary of those ledgers was the subject of evidence by - - -

HAYNE J: I was asking about what was in evidence, Mr Gilmour.

MR GILMOUR: Yes, I think that is, with respect, the answer, as far as we would say, your Honour.

GLEESON CJ: There are two competing possibilities and I would just like to understand which applies. Was it the case that at the commencement of this litigation your side actually knew the extent to which Thiess had overstated their costs, or was it the case that your side knew that Thiess had substantially overstated their costs but did not know by what amount?

MR GILMOUR: Your Honour, it is sort of a combination of the two but closer to the second. We sought to demonstrate, and successfully demonstrated, that in certain respects the plant was the subject of inflated rates. We knew that they had earned more revenue than they should have done. The difficulty we had was, with precision, marrying the two. In other words, if one was wanting to be precise, what was the precise result of the inflated rates? The view was taken that we should identify the excess revenue and then see if there were any other innocent explanations which would reduce that when one is looking at that as being the prima facie measure of damages. That was really exposed, in our submission, by the pleadings and the issues were drawn along those lines, namely, yes, we did earn more revenue from the differential. We are entitled to keep it and in any event we were entitled to earn more than 5 per cent and we did make productivity gains in 1993 and we did make some cost underrun benefits.

As to the precise result in relation to all of the equipment and how that visited the working of this particular contract, it necessarily required some understanding of productivity gains and losses, cost overruns and underruns, to see in fact what additional revenue Thiess obtained to which it was not entitled. The problem was that all those matters were intermingled in that final figure of excess revenue. Putting it another way, we were not in a position, as we viewed the matter, to isolate particular results from particular breaches.

I was at page 783 when your Honour the Chief Justice asked that question, where the difficulty which his Honour the trial judge had with the particular mode of proof advanced by Placer, namely the project forecasts, arises. He said that it "cannot be relied on (without adjustment)". The reason that he makes that finding appears in the beginning of that paragraph when he says:

Accepting, as I do, that profit was deferred from the 1989 contract to the new contract -

So your Honours understand the terms, the so-called old contract was the contract which had begun in 1989 and ended in August 1992 when the new partner in contract began. The new contract was that partner in contract.

For various reasons, consistent with Thiess' internal management policy, Thiess did not always declare to head office the full amount of its profits. Often it retained some profits which were then released later. The evidence was that the project forecast documents could not be relied upon to identify precisely what was the projected profit under the new contract or the Granny Smith contract because, on the evidence of Mr Zuvich, those project forecasts relating to the new contract contained some profit deferred from the old contract and you could not on the face of it determine what was old and what was new.

But it is important in relation to our submissions for your Honours to see that as quite an important finding by the trial judge, that he looked at the project forecast in light of the way that we pleaded our case on damages, he visited the evidence on project forecasts and he made the finding that he could not, without adjustment, be relied upon because of the deferred profit issue.

Unfortunately, as it transpires, but at places such as 919 in volume 4, and our friends pick up on this and the Full Court picks up on this, his Honour adopts a rather shorthand method of describing his earlier finding. At line 21, where his Honour is dealing with Placer's approach to the assessment of damages, just where I took you in the Full Court's reasons, at line 21 his Honour says:

I do not accept that this is the correct approach, for two reasons. First, as I have held, the Project Forecasts and Contract Valuations for the Granny Smith contract cannot be relied on.

When he says:

as I have held . . . cannot be relied on.

What he actually held was they cannot be relied upon without adjustment.

If I can then compare the two methods, bearing in mind that our short submission is that both methods were, in principle, the same: they called for establishing on relevant admissible evidence Thiess' overall revenue from the contract, Thiess' genuine operating costs, Thiess' total profit by reference to its genuine costs and therefore it is a liable profit; that is the 5 per cent on its genuine costs. You take the allowable profit from the total profit and that is the prima facie ratio of damages. Now, we relied upon the project forecasts and this is what his Honour the trial judge did. Instead of using the project forecasts to calculate Thiess' profit, he relied upon the evidence of Thiess' expert, Mr Calder, a chartered accountant, and the relevant treatment of Mr Calder's evidence is found at 925.

This is part of his Honour's treatment of damages which actually begins at page 922 at line 10, where he said:

In these circumstances, I think the appropriate course is to calculate, on a global basis, the difference between the revenue actually derived by Thiess and Thiess's costs - - -

GLEESON CJ: Does that mean Thiess' actual costs?

MR GILMOUR: It means it genuine costs.

GLEESON CJ: It does not mean actual costs?

MR GILMOUR: No, it means it is genuine.

GLEESON CJ: Genuinely estimated costs?

MR GILMOUR: Genuinely estimated costs; the costs which were affixed by the internal plant department "plus a margin of 5%", although as I said earlier, your Honour, he took into account a cost overrun of $100,000, gave the benefit of that to Thiess. He said:

It is not suggested by Thiess that its increased profitability resulted from anything other than the differential rates and improved productivity, to which I shall refer below.

And that is just a reference to the pleadings that I took your Honours to earlier. Then, dealing with the - - -

McHUGH J: Well, the Full Court seemed to reject that, did it? Did not it, at some stage, in the Full Court's judgment say - or criticise his Honour's reasoning on the basis that there were only three sources from which Thiess could earn profits, they being the 5 per cent allocation, the cost underruns and the productivity gains?

MR GILMOUR: Yes, and the Full Court, in that respect, correctly identified that that was his Honour's assumption and, indeed, misconceived that that, in fact, was the way that Thiess ran its case on the counterclaim, and that is ground 2 in our grounds of appeal that, in fact, that was the way that Thiess conducted its case.

The proposition put by Thiess is, "In our claim we, Thiess, claim damages into the future for your wrongful termination of the contract". It pleaded that it was entitled to more than the contractual 5 per cent. It pleaded that it had, during the currency of the contract, earned more than 5 per cent because it had made productivity gains. It wanted profits to be calculated not on 5 per cent of costs, but 71/2 per cent of costs, and it pleaded productivity gains in relation to its claim. The Full Court said just because it pleaded productivity gains in relation to its claim does not mean that it had anything to do with the counterclaim; that Thiess may have had its own forensic reasons for not advancing other productivity gains, for example.

We can develop it later, but with respect, that is a rather disingenuous approach to the matter. I mean, if Thiess had an explanation for it having earned more than 5 per cent, you would expect it would advance all of its explanations, not just for some tactical reason advance some and hold back others.

The Full Court also said that you could not compare the two because they are related to different periods. Thiess were claiming damages into the future plus they were claiming damages during the currency of the contract. What that ignores completely, with respect to the Full Court, is that the evidentiary basis for either approach always was what profits were earned during the contract. It is just that Thiess then looked forward, we looked back.

GLEESON CJ: Thiess was the plaintiff in this litigation, is that right?

MR GILMOUR: It was the plaintiff seeking damages for wrongful termination of contracts.

So, his Honour is faced with our assessment and the way that we want to arrive at the actual contractual profit or revenue above costs which Thiess had obtained in the contract, so he goes to the evidence of Mr Calder at page 925. At lines 15 and following, his Honour said:

In his report, Mr Calder stated that as at 29 July 1992, Thiess' profit at site level included $5.490 million of unreleased profit.

That is what was the problem with project forecasts; they included figures of unreleased profit from the old contract.

McHUGH J: That is the 1989 contract, is it?

MR GILMOUR: That is the one that goes from 1989 to 1992.

McHUGH J: Yes.

MR GILMOUR: His Honour then said:

When taking this -

and the word "this" must mean to issue unreleased profit -

and other appropriate adjustments into account, Thiess' actual profit under the 1989 contract was $17.058 million.

So, what his Honour did was he relied upon the evidence of Mr Calder to make the necessary adjustments which were necessary to take account of the problem which had manifested itself concerning the project forecasts, namely, the unreleased profit.

GLEESON CJ: That is a timing issue, is it not?

MR GILMOUR: It is a timing issue, exactly.

GLEESON CJ: Yes. In building and construction and earthmoving contracts there can be great difficulties in working out the appropriate way to account, having regard to the timing aspects of it.

MR GILMOUR: Yes. In addition to that, your Honour, Thiess actually had as a policy that it did not - - -

McHUGH J: It had to be 20 per cent profit, was it not?

MR GILMOUR: It did not account for any profit until 20 per cent of the contract, in terms of, I think, revenue had actually been carried out, but even then, in addition to that, Thiess, at site, for its own reasons would sometimes not release the whole profit in one contract but might hold it back and add it to another contract because in that way it could, I suppose, negotiate different rates on the other contract and add profit from the other one because it always had to meet for company policy reasons per contract an overall profit of 101/2 per cent.

In any event, our very simple submission is this that the Full Court misconceived what the trial judge did having found that the project forecasts were unreliable without adjustment. All we wanted to prove, using the project forecast, was what was the profit that Thiess earned. That is the total profit. What one finds here is that in applying Mr Calder's evidence he identifies under this profit of 5.49 million. His Honour says:

taking this and other appropriate adjustments into account, Thiess' actual profit under the 1989 contract was $17.058 million. Mr Berrey agreed with this approach.

That was Placer's witness:

According to Mr Berrey, the profit earned by Thiess from the 1989 and Granny Smith contracts -

that is the old and the new taken together -

was $25.282 million. However, the profit figure from Thiess' final Project Forecast -

So, his Honour is looking at the documents - the project forecast. The final figure:

was $25.623 million.

Which is higher than Mr Berrey's assessment. He said:

The reason for the discrepancy is not clear, but I will accept Thiess' figure.

The result is that the profit under the Granny Smith contract was $8.565 million -

and he gets that by taking the figure of $25.623 million which is from Thiess' final project forecast, line 26 or 27, and he deducts from that the figure of $17,058,000 which is the figure for Thiess' actual profit under only the old contract - that is the 1989 contract - but having taken into account the adjustments to take account of the unreleased profit. So what his Honour by that means did was address the very issue of what was Thiess' profit and he overcame the problem with project forecasts because the unreleased profit problem was taken care of by Thiess' own witness, Mr Calder. In the end you just get to the same issue: what was the profit?

McHUGH J: The only reason at 783 that he rejected the reliability of the project profit was because it took into account the 1989 - - -

MR GILMOUR: Unreleased profit.

McHUGH J: Unreleased profit, yes.

MR GILMOUR: Yes. One can see why that was so but, with respect, the Full Court really was - - -

McHUGH J: In fact, what his Honour said at 783, it "cannot be relied on (without adjustment)".

MR GILMOUR: Exactly, and it is those - - -

McHUGH J: So, he did not say it could not be relied on absolutely; he just said it could not be relied on - - -

MR GILMOUR: The problem is, your Honour, as I said earlier, that later on in his reasons, for example at 919, he said:

as I have held, the Project Forecasts . . . cannot be relied on.

That is at page 919 between lines 20 and 25. I will show your Honours where the Full Court picks up on that finding, that imprecise finding of what he had in fact held, in order to then say that what his Honour did was a completely different method to that proposed by Placer but, in fact, it was not.

GLEESON CJ: Whether they were right or wrong, the Full Court said that there was a fundamental flaw in that reasoning on page 925, line 35, which assumes that there is such a thing as a "profit entitlement" and an "excess profit".

MR GILMOUR: I do not think, with respect, the Full Court came to that conclusion.

GLEESON CJ: If you look at paragraph 164, the last sentence on page 1159 - - -

MR GILMOUR: That is the burden of proof question, your Honour.

GLEESON CJ: They say this entire methodology proceeds on an assumption that the only sources of profit earned by Thiess were those three items there. If you destroy that assumption then you pull the rug out from under this methodology that is adopted on page 925, do not you? I am not saying that that is right.

MR GILMOUR: That is correct, yes. It is correct to say that that was how the Full Court put it.

McHUGH J: Your answer is that that was the way Thiess conducted its claim for damages?

MR GILMOUR: We say that as a secondary submission. Our primary submission is that irrespective of the way that Thiess conducted its case, even it had raised no explanations for the excess revenue, it still carried the burden. It just happened that in this case it did plead additional explanations and it did advance evidence of those, albeit it was largely rejected. So in a way, if we are right about the evidentiary burden question, you do not actually have to look at the way that Thiess conducted its case.

McHUGH J: Do you make any use of the onus provision in clauses like 2.1.8 at page 532: "The onus would be on the Contractor to justify in detail any upward rate revision required"? I do not think you mentioned that when you took us to those clauses.

MR GILMOUR: Well, if anything, that assists us, because in so far as there is a decrease in productivity and the contractor was wanting more revenue and wanted an upward revision of the rates, then it was for the contractor to come to the table and say, "Our productivity is down, it's more than 7.5 per cent down. We want a revision in the rates or, at the quarterly review under 2.1.10, likewise we want the revision of rates".

So this case is concerned with Thiess asserting in its pleading that it had earned more by productivity gains and led evidence in that respect, and all that was the subject of considerable evidence and findings of the trial judge that in the end, yes, there were productivity gains in load and haul. Thiess asserted it was of the order of $1.3 million. Now, your Honours, if you added $1.3 million, for example, to the 2.7, you would be up to $4 million - - -

GLEESON CJ: 2.7 plus 5 per cent, actually.

MR GILMOUR: 2.7 plus 5 per cent, plus 1.3, or whatever the figure was, you would be up to around 4. The trial judge said, "No, I don't accept that, don't accept your evidence. I do accept the evidence, however, of Mr Berrey" - who was our witness - "that there were productivity gains in the order of $500,000 and he got the benefit of that". The rest of the possible potential theoretical sources of extra profit, if any, as the Full Court said, were ventilated from the Bar table in the Full Court.

McHUGH J: What about the proposition that the 500,000 for productivity gains was confined to the load and haul work only and did not look at productivity across the board? What do you say about that?

MR GILMOUR: Firstly, in relation to the contract, the contract provides for productivity gains and losses only in relation to excavate, load and haul. Again, with respect, the Full Court got it wrong. This is just one illustration. If you go to page 1172, the last page of the Full Court's reasons - it is part of paragraph 202 - it says:

The burden was on Placer to prove such profits. It made no attempt to discharge that burden. We have pointed to the fact that the absence of evidence in regard to profitability factors meant the learned Judge was unable to calculate productivity gains on load and haul.

That is just wrong. What the trial judge - - -

McHUGH J: That must mean "other than gains on load".

MR GILMOUR: Perhaps so. But, your Honours, Thiess adduced evidence of asserted productivity gains in excavate, load and haul, 1, that is from Mr Pearce, their expert, and in relation to drill and blast. Now, if you go to page 926, volume 4, you will find where his Honour the learned trial judge deals with that evidence. At line 24:

Evidence about increased productivity was given by Mr Pearce in his supplemental report.

And so on. At line 36:

In his principal report Mr Pearce referred to a similar exercise which he had carried out in relation to drill and blast . . .

Mr Pearce's assessment of excavator productivity was checked by Mr Lawrence Joseph Gillett, a graduate mining engineer with some 23 years experience in the industry. He had been retained by Placer as an expert.

So his Honour looks at all of that evidence and the figure of $1.3 million that I was referring to concerning what was Thiess' asserted extra profit referrable to the excavate, load and haul part of the contract is found between lines 26 and 39.

In particular, you will see that the final figure sought by Thiess under this heading was $1.239 million. His Honour said:

I do not accept that approach is valid, because I accept Mr Gillett's evidence -

and so on. Ultimately, at 928 at line 11, he says:

This produces an amount of approximately $0.5 million.

That is the figure that he allowed against the extra revenue.

GLEESON CJ: Well, we had better come back to paragraph 202 after the adjournment, Mr Gilmour, because that seems to be the point at which, ultimately, you lost.

MR GILMOUR: Yes.

GLEESON CJ: We will adjourn until 2.15 pm.

AT 12.46 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.16 PM:

GLEESON CJ: Yes, Mr Gilmour. You were on paragraph 202.

MR GILMOUR: Forgive me, your Honour, I think I was actually in the middle of addressing a question by Justice McHugh and I was diverted. If I could return to that, on the question of other areas of productivity in the contract. I had taken your Honour Justice McHugh to page 1161, I think, and paragraph 173 of the Full Court's reasons. The Full Court there raised the question of the drill and blast section of the work:

Thiess contended at the trial that it had made productivity gains in -

that area. In the fourth line, the word "profitability", I think, should be "productivity". The Full Court then says:

The reason that no such evidence was led again relates to how the issue of damages was treated at the trial -

Now, with respect, that is not actually what occurred. Could your Honours turn to page 928 of the learned trial judge's reasons. Recall that Mr Pearce had given evidence about productivity for excavate, load and haul. He also gave evidence as to productivity in relation to the drill productivity. If you look at line 34, 35, one sees that. For Placer's part, Mr Gillett was in contest as to that evidence, and, in the balance, the trial judge accepted Mr Gillett's evidence and rejected the evidence of Mr Pearce. With respect to the Full Court, it had nothing to do with the way that the matter of damages was dealt with. It was simply a question of an issue of fact, namely, whether there was productivity increase and what its extent was.

By reference to documents later I can tell your Honours that Thiess contended that it had made a productivity gain of $220,000 as a result of this source of additional profit but, having regard to the totality of the evidence, the learned trial judge held that that had not been established by Thiess.

Can I just round off the submission that whilst the trial judge had regard to, in one particular respect - and I am here referring to the evidence of Mr Calder and the adjustments to the profit figure, as opposed to looking at merely the project forecasts - that the approach of the trial judge was, for all intents and purposes, identical with that of Placer in its pleaded case in the way that it ran its case. To make that proposition good, I had taken your Honours to 919:

Placer seeks to have its damages assessed in the following manner -

paragraphs 1 to 5. Paragraphs 1 and 2, namely the identification of the total revenue and then the identification of profit using the project forecasts, taking one from the other to arrive at profit, was simply supplanted by the evidence of Mr Calder, who said that the profit figure for the new contract was $8,565,000. That is from page 925. In relation to the question of costs, which is paragraph 3 on that page, that was evidence which was given by Mr Berrey. That appears at page 923, at line 20:

During the same period, Thiess' costs amounted to $62.243 million.

Item 4, the 5% margin, was simply was simply 5% of that figure that Mr Berrey had given of 62.243, producing a resultant allowable profit, to use the phrase used by the trial judge at 4, of $3.112 million. That appears at lines 30 and 31 on page 923. Then to arrive at the damages figure, on a prima facie basis at least, one simply deducted that figure of allowable profit of $3.112 million from the overall profit figure given by Mr Calder of 8.565 and you get, I think it is, $5.54 million, but from which the trial judge deducted 100,000 for the difference between the cost at plant department level and the actual cost, being a cost of, rounded up, $100,000 and gave that benefit to Thiess. So that produces $5,353,000.

So our submission then is that, properly understood, this was no different method. It certainly was not a method which was materially different but, rather, the trial judge merely, looking at Placer's approach, relying upon Mr Calder, made the adjustments and simply did the arithmetic following upon a fairly simple equation: revenue profit, total profit and costs. So, in our submission, the Full Court was wrong in finding that the method of the trial judge was not procedurally open in the sense that is reflected in paragraph 192 of its reasons. The way that the Full Court put it was, accepting submissions from counsel for Thiess, that :

in regard to the calculation of Placer's damages -

that the learned trial -

Judge's approach . . . was prejudicial to Thiess, as Thiess did not know and could not have known that the particular elements of the learned Judge's formula were to be relevant factors in the determination of Placer's damages. In particular, it was said, Thiess did not appreciate that profit earned by it otherwise than from the agreed 5 per cent, cost underruns and overruns, and productivity issues raised by it when presenting its claim -

that is its claim for damages -

would become material. They submitted that . . . had not had the opportunity of testing the relevant witnesses called by Placer in regard to matters of this kind, nor had Thiess been given the opportunity of leading any evidence-in-chief on the issues in question.

And, in our respectful submission, that is an incorrect finding. I have taken your Honours to the pleadings. It is apparent that these very issues identified in this paragraph were pleaded by Thiess. It is quite apparent that they were central in the trial and it is our respectful submission that the factual matrix of the evidence going to these matters was relevant to both the claim and to the counterclaim. Can I take your Honours to page 238, volume 1 - - -

GLEESON CJ: Just before you get that far, on page 120 is the paragraph that you have referred us to before, subparagraph (xiv). I want to be sure that I understand exactly what that paragraph means. First of all, it covers the period January 1994 to June 1995. What was the relevant period? That paragraph covers January 1994 to June 1995. What was the relevant period?

MR GILMOUR: The relevant period in terms of the new contract was from August 1992 to June 1995.

GLEESON CJ: Why was that allegation limited in time to only a part of the period?

MR GILMOUR: I am afraid I do not know that the answer to that question.

GLEESON CJ: The next question I wanted to ask you was this: is that expressed in an elliptical fashion? It talks about the difference between the plaintiff's internal plant department rates and the amount it charged on the basis of the said base rates. That seems to compare two disparate concepts.

MR GILMOUR: Your Honour, I do not think there would be any contest about this; it is the difference between the rates charged by the internal plant department to Thiess - that is the internal rate - on the one hand and the rate charged by Thiess to Placer because the rate charged by Thiess to Placer was what is properly described in contractual terms as the base rates. If your Honour has regard to section C, you will see that there is a number of base rates.

GLEESON CJ: But is the difference there referred to the same as the difference between the amount that the plaintiff should have charged the defendant on the basis of the internal plant department rates and the amount it actually charged the defendant?

MR GILMOUR: That is as I understand it, your Honour.

GLEESON CJ: I just wanted to be sure that that is what the allegation means because it is admitted.

MR GILMOUR: Yes, your Honour. I was not the pleader. I am, in a sense, construing that, but that is as I have understood it, having regard to the contractual language, on the one hand, and the evidence concerning the internal plant department and the findings of the trial judge and the current findings of the Full Court as to the genuine estimates being the internal plant department rates charged by that department to Thiess at site.

GLEESON CJ: Then, that amount was calculated without any necessity to engage in the exercise described in paragraph 165(c) and (d) of the judgment on page 1159.

MR GILMOUR: Yes, your Honour, that is a matter I took up with my learned junior, Mr Duncan, during the luncheon break. We do not have the papers here in Canberra but, doing the best he could, his understanding was that that was not a calculated figure but it was a figure that emanated from some document. But that is as highly as I could put that matter, your Honour.

GLEESON CJ: At all events, whatever the source of the figure, which now seems mysterious, it is the product of a calculation in relation to part of the period of much the same kind as is recommended in paragraph 165, presumably.

MR GILMOUR: Yes, there was some - I would not put it as lowly as speculation, but I think your Honour asked me this morning about whether there was evidence, for example, of the extent of the plant variance and I was told by those instructing me that there is evidence but I am having it checked - I will have it checked overnight - that exhibit 8 which was a document which was annexed to Mr Parson's statement is evidence that from the period that the plant variance account commenced which was March 1994, that the amount of the plant variance account attributable to the Granny Smith contract was just short of $2 million.

So I am not sure whether therefore the period January 1994 through to June 1995, which is roughly the period of the plant variance account, whether there is any cross-reference between the amount in the plant variance account on the one hand and the figure that is pleaded at page 120. I was not going to put the matter of the plant variance account until I had checked the exhibit and spoken to my friend, so I only put it to your Honours in that conditional sense.

Your Honours, on the question of the way that the trial was conducted in relation to the issue of whether it was procedurally open, we further point to the way the matter was opened before the trial judge. If I can take your Honours to volume 1 and page 238. This is really just to build on the material that I have put to your Honours. At page 238 Mr Pringle, then senior counsel leading for Thiess, opening for Thiess, said at lines 29 and following:

I'm not sure whether it is dealt with in detail in the witnesses' statements, but it certainly is dealt with by our expert; that is, our engineering expert, Mr Graham Pearce. He explains two important things, that in 1993 we achieved considerable productivity efficiencies in regard to the excavator, and he also did an exercise in regard to the drilling and blasting and came to the conclusion that we had made a significant improvement on the calculated productivities in our actual productivities for drilling and blasting per linear metres per hour.

TEMPLEMAN J: Yes.

PRINGLE, MR: We say that that was the reason for the additional profit, and not that we had hidden profit in the rates.

That opening, with respect, your Honours, is entirely in line with the pleading to and the defence to the counterclaim as to those matters, and in paragraph 32 of the reply, repeated in the defence to the counterclaim, I think paragraph 80, that not only was productivity relevant to the issue of our damages, not only was costs underruns relevant, but that in particular it was in relation to 1993 and that in relation to 1994 and 1995, profit was roughly 5 per cent of costs and implicitly there were no such gains.

At page 246 Mr Clifford, who is appearing as my friend Mr Jackson's junior today and was junior to Mr Pringle then, at about line 12 said to his Honour the trial judge:

It is not in dispute that we earned more than 5 per cent, as Mr Pringle has said.

PRINGLE, MR: On costs.

CLIFFORD, MR: On costs. If I can stay with my definition, it is not in dispute that we earned more than 5 per cent on costs and it's not really in dispute as to during which period we earned that more than 5 per cent.

I can say, and I will develop this, your Honours, that it was the submission of Thiess at the trial that in the second half of the contract - that is 1993 and 1994 - it did not even make the 5 per cent. It made something less than 5 per cent but it made more than 5 per cent in the first half. He continued:

in dispute, as I apprehend the experts' reports and the witnesses, is where the 5 per cent was earned, how it was earned or on what it was earned, and the real issue there is whether we earned the more than 5 per cent on our case on improved productivity. As Mr Pringle has said, we say that beating the 5 per cent on cost was done because we continually improved our productivity by the means outlined: updating equipment and so on.

We have also earned it on productivity because the material we encountered we could mine more easily than had been anticipated.

A little lower:

The contest is that the defendant's case seems to be that we earned this profit above 5 per cent on cost because we disingenuously inflated the cost of our plant, which was one figure that went into the computer program used to generate a BCM rate.

The navigation through the evidence will be very much concentrated upon those two matters. Mr Pringle has addressed you for 2 days on all of the material that we say go to productivity issues and no doubt Mr Gilmour will deal with the inflated cost issues. There are experts on both sides to help us with this material. We will deal with that when we have resolved the objections.

We say, all of that is entirely consistent with the way that the case was run and, indeed, pleaded - which is not to say that productivity was not an issue in relation to their claim. But it was plainly put in the pleading and on the evidence and in these openings referable - we say, indisputably - amongst other things, to the counterclaim. At paragraph 160 - that is page 1157 in the Full Court - dealing with the question of productivity - it actually starts on the previous page, at 158, so one discerns the context of their Honours' remarks.

At 158, we see that it is the approach of the trial judge to assessing Placer's damages. At 160, their Honours said, in the third line:

The extent of the productivity increases (and the resulting profits to Thiess) was very much in dispute at the trial. The learned Judge rejected the evidence tendered by Thiess in that regard and accepted that of Mr Berrey, tendered by Placer. The consequence was that his Honour found that there was productivity increases of $500,000 for 1993.

Now, I must necessarily point out to your Honours that that needs to be taken in its further context, which contains findings adverse to Placer, but these commence at 1164, at paragraph 181. Now, their Honours there refer to productivity being raised in paragraph 32 of Thiess' reply, and then set out paragraph 32(a), (b), (c) and (d). What their Honours do not set out - although, in our submission, it is quite relevant - is subparagraph (j) of that same pleading, which is found at page 177 of the appeal book, which says that:

from January 1994, the profits derived by the plaintiff on its costs were reasonably close to the agreed profit percentage on turnover.

So that, when one is looking at the issues on productivity, you can see that the field - meaning the entire term of the contract is accounted for. Evidence was led only as to 1993; as to the rest of the contract, 1994 and 1995, in their pleading, not mentioned in the Full Court's reasons, we see that there were no productivity increases, because profit was around 5 per cent on costs. The Full Court went on:

By these allegations Thiess was using productivity improvements as part of its answer to Placer's allegation that it failed to disclose that it was earning profits that exceeded 5 per cent of its costs. Thiess' argument on that issue was that, at all material times, Placer monitored Thiess' rates -

and therefore knew that Thiess was earning profits of more than 5 per cent -

Productivity was not raised by Thiess in connection with Placer's counterclaim in any sense as being relevant to the assessment of Placer's claim for damages.

Now, I have taken your Honours to the pleadings, and, with the greatest respect to the Full Court, that is simply incorrect - as the matter was pleaded, and as the matter was run. It was not raised by us; it was raised by Thiess. We led evidence about it, but on the issue raised by Thiess, an issue that we met at trial. In the last two lines:

It is apparent from those paragraphs that Placer did not assert that productivity was in any way relevant to its claim for damages.

Well, that is merely to say, in paragraph 96 of the counterclaim, that we set out our claim for damages in the way that we did. We were in no position to assert what productivity gains or cost underruns Thiess had. That was a matter for them. That has always been our submission, and it is our submission before this Court that that is an evidentiary burden that shifted to Thiess, once we were able to establish a body of money that could be described as a prima facie measure of damages.

Again, at 1166, there are a number of findings of the Full Court which really pick up submissions made to them in the Full Court. At 184 their Honours say, referring to Thiess, in the third line:

They did not intend to submit that, as regards Placer's counterclaim, Thiess' profits could be established by determining productivity improvements and using the result in the way adopted by the learned Judge.

That was not an issue that had been raised in any way at the time the remarks in question were made. That is referring to the opening which I took your Honours to. In our respectful submission, that cannot be borne out on the material that I have taken you to. At 185:

It is one thing for Thiess to attempt to justify an increased claim for damages on the basis of increased productivity. In this context, a tactical decision might be made to rely only on productivity (of a particular kind and in relation to particular aspects of the work) as an explanation and ground for increased damages. It is another thing entirely to say that Thiess admits that, in calculating Placer's damages, Thiess' increased profitability is to be ascribed either to increased productivity (to the extent claimed by it) or to the use of inflated rates, and to nothing else. If Thiess had known that Placer was seeking to have its damages determined by reference to cost underruns and overruns and productivity, Thiess, by way of defence, might have raised issues very different to those that formed parts of its own claim for damages.

With respect, Thiess did raise those matters and they raised it in its defence to our counterclaim and there you have the finding of the Full Court about the timing question:

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. The factors bearing on each may differ, and this was not investigated.

With respect, your Honours, the evidence is exactly the same, it is just that one points to the future, one points to the back, but the evidence is the same.

In our opinion, nothing in the passages set out above justifies an inference that, in regard to Placer's claim for damages, Thiess intended to admit that its increased profitability did not result from "anything other tha[n] the differential rates and improved productivity."

With respect, it was not a matter of what Thiess was prepared to admit in relation to our pleading; it was a matter of what Thiess raised in its own pleading as an answer to our claim for damages, namely, why it was that it had earned more than 5 per cent on costs. So the findings in those passages, in our respectful submission, are simply not made out. Can I take your Honours to a document utilised by Thiess in its closing submissions which appears starting at page 687.

GLEESON CJ: What book?

MR GILMOUR: It will be book 3. This document was not an exhibit but rather and aide-memoire provided to the trial judge by counsel for Thiess as a document bringing together relevant evidentiary material going to the question of the profit on the new contract, as the document is entitled. At paragraph 2 on that page your Honours see that it is contended that the:

new contract profit at site . . . is 8.5 million rounded up.

They refer to the evidence of Berrey. That figure of $8.5 million approximately is the figure which the trial judge relied upon at page 925 in volume 4 of the appeal books being the figure that he obtained using the profit figure calculated by Mr Calder but a figure with which, as his Honour said, Mr Berrey agreed. So this document provides yet further evidence of the fact that there is no contest about what was the profit under the new contract and so the concern about the project forecast simply falls away. At the following page, 688, paragraph 7, after various earlier calculations one finds this:

This means:

(a) first half profit is 12.3%;

(b) second half profit 4.4%.

Taking the second first, namely that in the second half they made less than 5 per cent, that is sort of consistent, certainly not inconsistent, with the pleading that I took your Honours to in paragraph 32 of the reply, repeated in 80 of the defence to counterclaim, that in the second half of the contract, that is January 1994 to June 1995, profit on costs was around about 5 per cent.

But what it plainly demonstrates in terms of the Full Court's concern that there may have been other possible sources of additional profit that on Thiess' case that could not be said to be so for the second half of the contract. So the speculation which was the subject of submissions before the Full Court as to those matters is simply not borne out by the facts and it is not borne out by facts established and contended for by Thiess at the trial.

In relation to the question of the revenue for the first half of the contract in paragraph 8 it is said that it is obtained from four sources. Firstly:

5 per cent mark up on turnover -

that is the contractual profit it quotes -

(b) productivity gains -

but, obviously, only in relation to the first half, and that is 1993. There is no suggestion it was for 1992, and 1993 was the subject of evidence and it was the subject of evidence in the findings in the way that it ended up with half a millions dollars being credited to Thiess.

(c) plant operating revenue (first half over-recovery entirely related to genuine estimates of costs by internal plant department -

That is the question of cost underruns which is the subject of evidence by Mr Berrey and findings by the trial judge, they got a benefit of $100,000, and:

(d) major repair and depreciation estimates for plant by the project team.

That describes the evidence of witnesses for the plaintiff that the differential between the plant department rates and the rates given to Placer had been increased to take into account, amongst other things, underestimates by the plant department for major repair and depreciation estimates which is all to say, in other words, that we are entitled to the differential in the rates.

Now, everything that is in that document and on that page is consistent with the pleadings and it is consistent with the way that his Honour the trial judge approached the case which was, "Having arrived at the figure of $5.35 million for excess revenue above 5 per cent I am going to take off for productivity half a million". That was pleaded. There is evidence and there is findings. I am going to take off $100,000 for cost underruns". Thiess did not suggest that its additional revenue came from any other source, and that is exactly right, Thiess did not suggest that.

One then looks at page 689 where the issue of productivity is further expanded. At paragraph 11:

Productivity related profit:

(a) load and haul revenue to December 1993 . . . approximately -

well, exactly -

$1,238,533 of . . . productivity gains.

I took your Honours earlier to the reasons of the trial judge where he rejected that evidence and substituted a figure of a half a million. At (c):

drill and blast to December 1993 -

A bit lower down you see the figure referrable to Pearce's evidence:

approximately $220.00 of the first half profit is productivity related.

That is summarised at (d), a total of nearly $1.5 million which Thiess at trial said constituted additional profit, which it was contractually entitled to, arising out of productivity gains. As to that, the findings were half a million dollars looking at both of them. That is adverted to, actually, in the last page at 690 in the aide-memoire. It was not so much a concession in argument, it was that that was the evidence of Mr Berrey.

So, for these reasons, your Honours, it is our submission that the manner adopted by the trial judge was properly understood; the manner in which Placer argued for, simply, that one of the problems with our approach was rectified by his Honour by reference to evidence which was called by Thiess. The issues of productivity of costs underruns of other sources of profit, were issues which were, in fact, raised by Thiess on the pleadings and, with respect, those were issues which it would always have been known would have arisen in the way that Placer contended, in its case, damages were to be assessed, because we always sought to expose the excess revenue above 5% of the costs. If there was an honest, legitimate, contractually based answer to that excess revenue, it was always going to be open and obviously so to raise such explanations. We say they were.

So not only was it open, in our submission, Placer did as much as was necessary, in the way that it did, to establish a prima facie measure of damages and they are then swung across the Bar table to Thiess, whether or not it had pleaded it, but, in fact, it had an evidentiary burden to establish matters which were not causally related to the breaches.

GLEESON CJ: Did the evidence disclose when and how Placer found out that Thiess was doing what you complained of?

MR GILMOUR: Well, I can tell, your Honour, not that I was there at the time but my friend, Mr Duncan, appeared. My junior was then a solicitor with my instructors in Perth and when he was considering the claim of Thiess for damages and saw that they were claiming not 5% on costs, which was the contractual entitlement, but 7.5% for costs, simply commenced a train of investigation as to why that could be so. It was some year or so, I think, after the statement of claim was issued in the main action, that the counterclaim was issued. So it was because of what Thiess claimed in its claim that gave rise to the investigation and ultimately the pleading of the counterclaim that they had been in breach in the way that the trial judge found.

If your Honours accept our submissions that the way the trial judge approached damages was procedurally open, then, in our submission, as we understand at least our friend's submissions at paragraphs 25 and 27, the question is not, "Can an evidentiary burden arise?", but, "Did it in this case?" Taking that view of their submissions, we simply say that, on the state of the evidence, and for the reasons that I have mentioned, that that position was reached on the evidence, which demanded proof from Thiess that it existed, and if we are wrong about that and the issue remains alive, we rely upon our submissions in paragraphs 19 to 31 in our summary of argument and I do not think I need at this stage to take your Honours through these in particular detail, unless there is material in that that - - -

KIRBY J: Is there a case that is similar to this in the sense that, as Justice Callinan said, you can get cases where you can approach the computation of complex damages in different ways?

MR GILMOUR: We have not put up a case on that, your Honour.

KIRBY J: In the theory of the law, one might think that an accurate requirement of legal principle yields but one answer, and accuracy of legal principle was obviously the thing that was concerning the Full Court.

MR GILMOUR: Yes, I appreciate that, with respect, your Honour.

KIRBY J: You have not struck another case quite like this? I see this case took 47 days at trial.

MR GILMOUR: It was a case mainly fought on the facts. Your Honour, the - - -

CALLINAN J: Well, Mr Gilmour, in Gould v Vaggelas 157 CLR, the case in deceit, Chief Justice Gibbs discusses different ways of assessing damages for deceit, some of which I am not altogether sure might not have been appropriate in this case, although the trial judge found that you could not prove nominal damages. But his Honour really does speak of a degree of flexibility.

MR GILMOUR: I must say, your Honour - perhaps I am assuming too much - that it was almost a trite proposition that there can be more than one way of proving damages and that merely because one does not elect to prove a way that in the end may have been accurate or more to the point of accuracy than another does not deprive a claimant of damages if the approach is reasonable.

CALLINAN J: Why should we assume that the approach that was adopted might not have yielded less in damages than if an orthodox approach, as the Full Court would have it, had been adopted?

MR GILMOUR: Your Honour Justice Callinan, I cannot say what that approach would have produced but what commended itself to the trial judge in this respect, with good reason, is that it is, by reference to commercial commonsense and the terms of the contract and the way the case was conducted, entirely reasonable to do what he did, to isolate the extra revenue and to ask the question, "Where did the money come from?" It either came legitimately or it came illegitimately. He knew that there was a very significant portion of illicit revenue in that excess, and in our summary of argument we point to any number of findings. For example, the finding that the figure of $1.2 million by reference to one document being the difference between the plant rate and what we were charged was treated by the senior managers at Thiess as profit. So there is any number of sources where you gain that confidence that - - -

CALLINAN J: Mr Gilmour, was issue joined on a method of assessment as suggested as being appropriate by the Full Court at 1159?

MR GILMOUR: No.

CALLINAN J: It was never joined on - - -

MR GILMOUR: Not at trial, no.

CALLINAN J: - - - on that at trial, was there? And the party to raise those sort of issues would have been the respondent, would it not? If the respondent wanted damages to be assessed in that way, then it was for the respondent to adduce evidence accordingly, was not it - to assert that and to adduce evidence accordingly?

MR GILMOUR: Without in any way detracting from our obligation, our burden to prove damages to a satisfactory degree, that is upon some reasonable basis, some prima facie measure of damages, it was open to Thiess to raise not only the matters which it did but to have raised the proposition that our method was not appropriate.

CALLINAN J: Did any expert report or any expert evidence tendered by the respondent go to any of items (a) to (g) on page 1159, as a matter of detail?

MR GILMOUR: No, they did not, your Honour, and I think that is self-evident from paragraph 168 on the following page where the Full Court says:

Detailed submissions in this regard -

that is referring to the complex process -

were made by all counsel. These submissions involved explanations of the FPC computer simulation process and the results it produced. Counsel were compelled, however, to attempt to persuade us of the merits of their submissions -

that is counsel for Thiess -

largely by reference to their personal understanding of the computer process in question, and not to evidence that bore directly on the relevant issues.

CALLINAN J: Take (d):

Calculate the notional contractual rates for the other items of plant referred to in (a), applying the appropriate plant department rates in accordance with the criteria laid down by the contract itself.

Those appropriate plant department rates would be matters within the knowledge and really for calculation by the Thiess department, would they not?

MR GILMOUR: All of that information would have been within the knowledge of Thiess - - -

CALLINAN J: Some of it you had access to and some of it you could have done your own calculations on, but - - -

MR GILMOUR: Your Honour is quite correct. Thiess made the breaches, Thiess did what it did and knew what it had done. We were forced to try across months of trial in the face of fierce resistance and denial to establish that they had done what we thought they had done. But certainly, if they had come clean, as it were, the method and information of producing a different result was available to them. Even on a conditional basis, we were successful in due course.

CALLINAN J: You have told me that issue was not joined on these items in this way at the trial. What about on the appeal, did the respondent submit on the appeal that that is the way it should have been done?

MR GILMOUR: The respondent's submission was that, really, generally in line with the submissions that I have made to your Honours in this Court, the thrust of our submissions through Mr Ainslie who ran the argument in the Full Court was that there was nothing wrong with what the trial judge had done.

CALLINAN J: There was no attempt to specify on appeal a method of calculation in accordance with each of these items by the respondent?

MR GILMOUR: There were submissions made from the Bar table about what should have been done, but not on the basis of evidence other than the fact that - - -

CALLINAN J: Was there a submission that this should have been done?

MR GILMOUR: At 165?

CALLINAN J: At 1159, yes, paragraph 165.

MR GILMOUR: As I said this morning, although not in precise terms, there was broadly such a formulation put to the Full Court by Mr Martin QC, senior counsel then acting for Thiess, and possibly also Mr Clifford. I cannot recall, I did not deal with damages in front of the Full Court and was not there for part of the time.

KIRBY J: I see in the book that there are some submissions reproduced. Do we have the written submissions of the respondent in the Full Court or not on this issue on the question of approach to damages?

MR GILMOUR: Yes, if I can just take instructions. If I can find that out for your Honour.

GLEESON CJ: As to paragraph 165 (a) and (b), coming back to paragraph 96(xiv) on page 120 in the pleading, may we take it that the fact that paragraph (xiv) only refers to part of the relevant period, that is, January 1994 to June 1995, that you were not in a position, at least at the commencement of the trial, to do what is prescribed by paragraph 165(a) and (b), except to the extent to which it was done in paragraph 96(xiv) of your pleading?

MR GILMOUR: So it would appear, your Honour. In other words, that is why I say in discussion in the luncheon adjournment, the best that my instructors and Mr Duncan could do to inform me was that they did not think it was a calculated figure but, rather, it emanated from some document that was discovered.

GLEESON CJ: Does it follow from that that, although at the commencement of the trial you knew that to a substantial extent an inflated rate had been used in respect of various items of plant, you did not know to precisely what extent?

MR GILMOUR: I can only answer that by inferring that that seems to have been the case, given the content of (xiv). I say that because I assume this is what your Honour the Chief Justice is driving at, that if we had known another figure, we would have pleaded that as well.

GLEESON CJ: It is difficult to avoid the impression that the method of calculation that you invited the trial judge to pursue and the method that he pursued, if it was different, was a rather oblique way of arriving at a calculation of the extent to which you were overcharged. In order to work out how much you were overcharged, instead of going directly to the amount that they actually charged you and said they should have charged X dollars less, what you did was begin with the total profit they made on the entire contract and then by a series of assumptions seek to deduce from the overall profit they made on the contract the amount by which you were overcharged. That is the way it all happened, is it not?

MR GILMOUR: Broadly, yes.

KIRBY J: Was that in order to get the judge to think big?

MR GILMOUR: I do not know, your Honour, but I very much doubt it.

KIRBY J: It does not seem a very accurate or principled way to go about it really, but there may have been reasons that we do not know and/in the difficulty of doing it in a more orthodox way.

MR GILMOUR: I can only tell your Honour it was - I only came into the matter three weeks before the trial. It was a very complicated matter and I can only assume that if a figure had existed for the period August 1992 to December 1993 in the same vein that is pleaded for 1994 to June 1995, then that would have been pleaded. What one does have, your Honour Justice Kirby, is very plain findings - I have not taken your Honours to them - of breaches occurring through 1993 of very significant portions of the evidence of the - - -

KIRBY J: The problem is not at this level at least so much the breach. It is what follows and the quantification of the damage, but I suppose you can fairly say that once you establish the breach, the outcome which has occurred is, to say the least, very surprising, which is what got you the special leave.

MR GILMOUR: Indeed, in the context of breaches of fiduciary duty, bearing in mind that his Honour found that there were breaches of fiduciary duty which were coextensive with the breaches of contract, why should not the fiduciary unravel the guilty from the innocent?

KIRBY J: Some points were argued on the special leave application concerning a shifting of an evidentiary onus or different principles for equitable compensation. One thirsts in this case for some pearl of law hidden amongst all these facts.

MR GILMOUR: If your Honour means by that do we submit that there is any different approach that one would take on the question of an evidentiary burden as between the case in contract and the case in equity, we make no submission.

KIRBY J: There is a lot of talk lately about this shifting of the evidentiary onus. In the early days of this Court it set its face completely against shifting of the legal onus and now one thinks that maybe we are moving in the direction that the English judges took much earlier of shifting the legal onus, but we just call it the evidentiary onus.

MR GILMOUR: The matter of an evidential burden seems to have been with us for a long time: in Purkess v Crittenden, Watts v Rake. It is adverted to, if perhaps only obiter, in Henville v Walker. It is a concept, with respect, that accords with common sense, particularly where the information upon which evidence can be advanced as information particularly within the possession of one party and not the other. In other words, why should the claimant be non-suited because it cannot explain every theoretical possibility in this particular case for possible potential sources of innocent revenue?

KIRBY J: I am not questioning the question of the onus, but I am questioning whether they really got the concepts right in calling them evidentiary and denying that they are legal onuses. But anyway, that is not something we have to - - -

MR GILMOUR: Well, in the end our submission would be that we have satisfied the legal burden. The evidentiary burden is one which the other side can pick up or not.

GLEESON CJ: Well, suppose the case was factually a great deal simpler, suppose it was just a contract to build a dwelling house and it was a cost plus contract, the builder was entitled to charge the owner the builder's costs plus 10 per cent, and suppose that after the contract had been completed the owner found out that in relation to half a dozen substantial items the builder had inflated his costs by a certain amount of money and the owner then sued the builder for the overpayments, money he had not received. Who, in those circumstances, bears the onus, (a) legal and (b) evidential, of establishing the precise amount by which the costs were overstated and what is the method by which you would go about doing it?

MR GILMOUR: I think on those rather simpler facts, compared to this case, it would be plainly the plaintiff.

GLEESON CJ: Well, the facts are simpler, but is the principle any different?

MR GILMOUR: Well, the principle of establishing damages, as best one can, does not, in our respectful submission, shift, but there is a real difference in this contract which sets it apart from the example your Honour the Chief Justice has postulated, and it is this. In the housing contract, it is a cost plus contract. In this case, it is not a cost plus contract; it is an estimated cost plus contract and, because of the review provisions within the contract, there does lie within the contractual provisions the very real possibility for Thiess, in this case, to earn more than 5 per cent on its costs, because of productivity gains and the like.

If that had not been the contract, if it had merely been a cost plus contract, we would simply have pointed to the difference between the rates as they should have been and the rates as they were and the difference in the revenue and said that is our measure of damages. The only reason there is a question mark against that figure is because our friends in their pleading - well, not these particular friends - at the time of Thiess' pleading said, "But we were entitled to earn more than 5 per cent and we were entitled to do that because we could get productivity gains and we could get cost efficiencies."

HAYNE J: That tends to suggest that radical question to which both parties have resolutely shut their eyes throughout this litigation about the certainty of the obligations that were undertaken. Now, the moment you enter that field you are entering the field of root and branch challenge to the certainty and enforceability of this agreement, as a body of agreements to agree, agree, agree, upon good faith, et cetera, but unless there is a certain answer that the contractual stipulations will yield, where is the contract?

CALLINAN J: You say it is all founded on a genuine estimate, do you not? Do you?

MR GILMOUR: The base rates were based on what ought to have been genuine estimates, that is correct, your Honour. I have taken your Honours to the fact that the trial judge took into account cost underruns across the length of the contract and gave credit for that to Thiess. In terms of certainty in establishing damages by reference to the contract, we did, in our respectful submission, the best that we could.

HAYNE J: But that I understand as a proposition. A plaintiff does the best it can - in your case the plaintiff by counterclaim does the best it can to establish its damages, but does it against an identified legally certain contractual obligation? If we pursue for a moment the Chief Justice's housing example, let it be assumed that there are four items where the plaintiff knows that there has been overcharging and proves those four items to the hilt, does that represent the limit of the recovery by the plaintiff?

MR GILMOUR: If that is the plaintiff's case then presumably that would be the level of it.

HAYNE J: And it is not improved, is it, by the plaintiff saying, "And what is more I suspect but do not know, cannot establish, that there might be some more fudge in a few more factors."?

MR GILMOUR: With respect, your Honour, that is not this case.

HAYNE J: What?

MR GILMOUR: That is not this case. In this case we have identified that Thiess gained revenue of more than $5 million more than it should have done, that is the first point. Adjustment are made to that by the trial judge. That then calls for some explanation as to - - -

HAYNE J: Can I interrupt you there. More than it should have. That is an appeal to a legal obligation capable of certain rendition and then to adjust that seems to wobble away from the certainty of the stipulation.

MR GILMOUR: With respect, your Honour Justice Hayne, there was no certainty discernible within this contract that at any time anyone could inevitably prove as to what were or were not productivities gained by Thiess in load and haul, in drill and blast, or cost overruns or underruns. Certainly not matters that we could identify. All of that material was within the ken of Thiess.

KIRBY J: Is not that the problem his Honour is posing for you as to whether this is a gentleman's agreement or that it is not something which can be formulated in terms of a legally enforceable obligation?

MR GILMOUR: I understand that - I think the thrust of his Honour's submission - - -

KIRBY J: It seems unlikely in such a huge enterprise of so much money that that would be what parties would do but cases have occurred where parties have said, "We will use our best endeavours or we will act in good faith", and courts have said, "That is all very well and you can do what you like but it is not an enforceable contract."

MR GILMOUR: There are findings here that there was an obligation to derive the rates in good faith, it is a concurrent finding and it is, with respect, in our submission, correct.

HAYNE J: I am not suggesting it is now possible to re-open that but I am inviting attention to the corollary that seems to flow from it, that if there is a legally certain obligation then the computation of damages should, in a case of this kind, be a matter of arithmetic, should it not? Why not?

MR GILMOUR: The reason why not, your Honour, is because of the issue of productivity gains and cost underruns, because under the contract, whilst that is plainly - these are two sources of additional revenue which Thiess could gain. In order to quantify them one has to have the very detailed information as to what, if any, productivity gains were made and what, if any, cost underruns did they have the benefit of.

Now, there are no other sources of additional profit under this contract. The legally enforceable obligation is, "We will pay you 5 per cent on costs". We established what that should have been and we established what they obtained beyond that. That then raises the issue of, "Well, can we quantify the productivity gains and the cost underruns?"

GLEESON CJ: In a situation where what you were entitled to was the recovery of overpayments which occurred by reason of inflation of estimated costs, you seem to have set out to force Thiess to disgorge all profits they made on the contract, except to the extent to which they could, by reference to what criterion I am not entirely sure, justify them. The assumption seems to be that to the extent to which they could not or did not justify the profits they made on the contract, it ought to be inferred that they resulted from overpayments made by your client.

MR GILMOUR: With good cause, your Honour, we say.

GLEESON CJ: That is a fair description of what happened, is it not, forensically?

MR GILMOUR: Forensically, your Honour, the case was fought along certain lines. It was fought along the lines that the additional revenue came from certain sources. That is the way that Thiess ran it. We did not force them to do anything. That is the way they ran their defence to the counterclaim.

GLEESON CJ: It may be that this happened because of the nature of the claim in-chief that was being made by Thiess. It may be - I do not know - that the way Thiess was putting its claim for the profits that it lost as a result of your allegedly wrongful termination of the contract everybody was drawn into considering these issues by reference to their claims for profit.

MR GILMOUR: We discussed this morning - your Honour may well be right. Certainly, Thiess did not consider there was any problem about advancing its case for damages by reference to 5 per cent that it was entitled to plus gains that it made on productivity which meant that it earned a greater than 5 per cent profit. That is a contractual profit at site. That is all we are worried about, not profit elsewhere.

With respect, rhetorically, that, in our submission, makes a lot of sense. If you know that you are only entitled to 5 per cent but could make it from other sources and you know what those sources are, productivity and cost underruns, what is wrong with the judge, given that that was what was plainly articulated in the pleadings - and that is how the case was run - looking at those issues and saying, "Well, that is where you say that you got your additional revenue; I accept some of it but reject most of it", but bearing in mind, your Honour, and with respect, this is what the Full Court did and your Honour the Chief Justice I think put your finger on it this morning, we are now yet again focusing almost exclusively on the question of productivity and cost underruns.

The main thrust of the defence to the counterclaim at trial was, "All of that differential we were entitled to, contractually, because you agreed to those rates", and they lost that issue. That is reckoned in lots and lots of money - millions of dollars. Abundant evidence is set out in our summary of argument that we are not dealing here with a small amount of money. We are dealing with a very large sum of money which was identified by the trial judge. But what is wrong, with respect, in saying, "That is the figure. It is 5 million more than under the contract, but for other explanations, you would have received. We have looked at those other explanations. We make findings in relation to them. You advance no other explanation, therefore, that is the measure of damages."

In a sense, it is no different - in fact it is probably - Henville v Walker, albeit in trade practices, was in some way similar. There can be no doubt that in Henville v Walker, I think, that there is a very real prospect that the damages that were granted by the trial judge were quite possibly higher than those causally related to the breaches but Mr Walker chose not to lead evidence as to explanations which would have diminished that measure of damages about matters which were not causally related to the conduct.

That, with respect, is no different in this case, and the debate, with respect, seems to be as to whether there is a perfect measure that could have been employed as opposed to a measure that was open or an approach that was open to produce a result that was fair between two corporations, with all the advantages they have of legal advice, and all the information concerning that legitimate revenue was within Thiess' own knowledge. That is how we put it, and I think that really deals with our second ground of appeal, namely, the finding of the trial judge at - I am sorry, the Full Court at 177, pages 1162-1163, where he picks up the trial judge's statement that it was:

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

And he says:

We accept that, were this submission to be upheld -

namely, the way the case was conducted -

the existence of other sources of profit would be immaterial.

Bearing in mind that the submissions in the Full Court and the findings of the Full Court at paragraphs 171, 174, 176, preceding that paragraph 177, are to the effect that there could have been, where there was the potential for other profit, but of course, beyond the matters pleaded, that merely remained a notional theoretical possibility, but what also existed, I might say, with respect, is that the Full Court has assumed that certainly it was open for there to have been other sources of profit pleaded unproved. There may have been other sources of loss. The contract postulated not just that Thiess may have had the benefit of productivity gains, it may have been the adverse beneficiary of productivity losses or cost overruns. On a review, on a three-monthly basis, they would simply have to wear that, because the views were not retrospective.

If I could finalise that submission in relation to paragraph 202, at the foot of page 1171, the Full Court said:

in order properly to calculate damages in accordance with Placer's method, the profits earned from all sources would have to be determined. The burden was on Placer to prove such profits. It made no attempt to discharge that burden.

Our submission is that that was not our burden:

We have pointed to the fact that the absence of evidence in regard to profitability factors meant that the learned Judge was unable to calculate productivity gains on load and haul.

Now, that may well be a misprint. Perhaps their Honours meant, "other than on load and haul", but as I told you before, and took you to the passage, they made findings also in relation to drill and blast. There were no other issues on that question:

There was no evidence of cost overruns and underruns in areas other than the internal plant department.

Well, there was evidence from Mr Berrey of those matters going across the whole contract, and I will take your Honours to that:

As we have mentioned, the productivity gains in the plant department that were assessed were for a limited period of time only.

Their Honours are there referring to the fact that it was early in 1993 that there was evidence. Well, we submit, that from 1994 and 1995, on their own case, there were none in any event, and so this Full Court rounds it off by saying:

There were other sources of potential profit in respect of which there was no issue at the trial. Placer did not attempt to prove the amounts of profit, if any -

Those words "if any" are quite illuminating, because it is not gainsaid that there may not have been losses, but that is all tied up in our submissions concerning the evidentiary burden.

Can I then finish by simply pointing to our submissions on the issue of remitting the question to the trial judge, and inform your Honours that we will simply presently rely upon our submissions at paragraphs 38 to 46 in our summary of argument, with two amendments. We abandon the submission at paragraph 42. I have earlier submitted that on the evidence of Mr Calder, the problem with the project forecast was overcome concerning deferred profit, and in relation to paragraph 41, we simply wish to add that it was the evidence of Mr Zuvich, which appears at 779 to 780, which raised the issue of deferred profit in relation to the project forecasts.

On the issue of sending it back to the trial judge, your Honours will see at 1171 that the Full Court, having at 197 considered "the grave consequences that follow for Placer" should it conclude that there be no retrial, considered whether it should be sent back and whether it should be sent back by reference to Placer's damages. I think I submitted to your Honours that the Full Court misunderstood what the trial judge's findings were in relation to the evidence concerning the project forecasts, the Full Court referring to the fact that the finding was by the trial judge that they were unreliable, rather than unreliable without adjustment. It then at 198 posed questions to itself really as to whether there might be:

evidence from which the maximum amount of unrelated profits -

this is at 1171 -

It has occurred to us that there may be evidence from which the maximum amount of unrelated profits and the minimum amount of profits from the Granny Smith contract could be determined.

Now, what that means - it is quite an interesting observation - when they are talking about "unrelated profits", they mean the deferred profits from the old contract - it cannot mean anything else. So the question the Full Court asked itself was, "Well, is there evidence from which we could discern what was the deferred profit?" It then went on to say:

That -

in other words, "if we could do that" -

would enable a damages figure to be assessed substantially in accordance with the way in which Placer conducted its damages case at trial.

So, at 198 it is our submission that the Full Court, plainly enough, regarded the approach of the trial judge as open if that question of unreleased profit could be overcome.

Their Honours had no regard to the finding of the trial judge which I took your Honours to concerning the evidence of Mr Calder, where he did make the adjustments for deferred profit. I think that was because the Full Court - and your Honours see this at the top of page 1171 - fell into error really because it found that:

The learned Judge considered that the Project Forecasts were unreliable, largely because they incorporated "unreleased profits" not relating to the contract.

So they do not direct themselves to the question of any adjustment in terms of the finding but go on to pose the question, "What if we could find out what the deferred profit was?" They then say in effect, "If we could, that would enable a damages figure to be assessed substantially in accordance with the way in which Placer conducted its damage case at trial. We fix up that problem and then there is no difficulty with the approach."

That is why, with respect, your Honour Justice Callinan said this morning, I think, that the Full Court regarded its approach to damages as one which would have not brought any complaint. In other words, that might be the perfect way of doing it. Here the Full Court is accepting, in our submission, that Placer's way was open. We say the trial judge's way was really Placer's way. However, having considered the question, the Full Court said:

The evidence as to damages was very lengthy, detailed, technical and complex. In the circumstances, we are not able in fact to decide whether evidence of the kind postulated exists.

Having done what it did, albeit, in our submission, correctly, at that point it should have sent it back, having posed that question, having posed the question earlier of whether it should send it back.

GLEESON CJ: I think I asked you this earlier, but do you say that such evidence does exist?

MR GILMOUR: I took your Honours to that this morning, the evidence of Mr Calder at page 925, where he identifies the amount of the unreleased profit. Calder does the very thing which the Full Court posed at 1171. The trial judge has regard to it and relies upon it. As I say, it seems that the Full Court misdirected itself because it held that the finding of the trial judge was that project forecasts were unreliable rather than unreliable without adjustment. That same error, with respect, was repeated by the Full Court at an earlier paragraph at page 1170 at the top of the page:

In the present case, the learned Judge carefully considered the way in which Placer sought to claim damages and found that the Project Forecasts were unreliable. It followed from that finding that the basis on which Placer sought to establish its claim at the trial failed.

What appears at 925 demonstrates that that is not so. I think that arose out of what the trial judge said at page 919 when he said of the project forecasts:

First, as I have held -

they -

cannot be relied on.

He just did not add the words there, "without adjustment". That finding was picked up by the appellant in the Full Court and by the Full Court in its reasons.

Having posed all of those questions, at the end the Full Court determined not to send it back to see whether such evidence existed, to see whether that issue could be addressed in that way, because of what it described as the "fatal fallacy" at paragraph 202 which it said "underlies this approach", that is, the approach of Placer. It says:

Like the method adopted by the learned Judge, it rests on the proposition -

And then we get back full cycle into the question of how the case was conducted, what was a reasonable approach to assessment and, ultimately, the evidentiary burden. The Full Court finding on the next page that we had to prove everything, our submission is, whether we are right or wrong, is that - - -

CALLINAN J: Your point is it should have been several other possible sources.

MR GILMOUR: Possible sources. It should be, with respect, your Honour, several other possible sources of profit or losses. By "losses" I mean something less than 5 per cent. One should not assume that it was always going to be more than 5 per cent. There might have been productivity losses, there might have been cost overruns.

CALLINAN J: It is no reason to make any assumption either way, in fact.

MR GILMOUR: With respect, no, in our submission, but there is reason if there such a source of legitimate revenue for the party in breach when we have established substantial damage to say, "But look, yes, we're liable for damages but not as much as that because we actually did have productivity gains and we did have cost underruns". That is what they did say and that has been dealt with.

Our final submission on the question of sending it back is simply to take your Honours to an exchange between Mr Justice Ipp, then a member of the Western Australian court and sitting on the Full Court in this case, at page 1104. This arises out of what appears at paragraph 196 of the Full Court's judgment at page 1170 where their Honours say:

Mr Martin -

that is Mr Martin, QC, leading for Thiess -

submitted in response that Placer had failed to prove its damages and therefore its counterclaim should be dismissed, but nothing in this regard was said on Placer's behalf.

Namely, nothing was said by Placer about sending it back to the Full Court. In our submission, a number of things arise out of that. Placer was not asked to make submissions by any member of the Full Court, simply a question posed by Justice Ipp to Mr Martin. In our respectful submission, what fell from his Honour led to a view, for which we could be forgiven for holding, that certainly his view and not one with which any other member of the Court stated any disagreement, that if there was a different way it was really a matter for the trial judge and not for the Full Court.

I will just refer to the exchange between lines 21 and the end of the page, particularly at about line 40, his Honour:

if the judge calculated in a different way to which the respondent wanted, whether or not the respondent has the evidence in a different way is a matter for the trial judge, not this court, I think.

GLEESON CJ: What part of the judgment did this contradict?

MR GILMOUR: At 196 where the question of a retrial of damages is referred to by the Full Court and it refers to:

Mr Martin submitted in response that Placer had failed to prove its damages . . . but nothing in this regard was said on Placer's behalf.

We merely say that we were not asked. Justice Ipp asked Mr Martin a question. He got the answer about the proposition that Placer should be non-suited, it should be sent back, and Justice Ipp said, if it was calculated a different way to what the respondent wanted, whether or not the respondent has the evidence in a different way - I think he means in that different way - is a matter for the trial judge and not this Court.

Had we been asked, we would simply have, no doubt, apart from saying that the trial judge's approach could be affirmed, our submissions would have reflected, no doubt, what Justice Ipp said, but if the Full Court came to the view that there was a material difference between the way it was run and the approach of the trial judge without taking it up with the parties, then, in line with Monaco, at least in the Full Court in Western Australia, or Pantorno v The Queen, whichever case one refers to, the matter should go back, and that certainly was what Justice Ipp was adverting to. Plainly, although Monaco was quite a different case, in that case, there was a material difference as a completely different approach to the construction of the statute was taken by the trial judge to that argued for by the parties. But we say that that is not this case. There is very little difference in principle. These are our submissions, your Honour.

GLEESON CJ: Thank you, Mr Gilmour. Yes, Mr Jackson.

MR JACKSON: Your Honours, may I deal first with the question of the course that we submit the Court should take in the matter. Our first submission is that the appeal should be dismissed. However, if the Court takes a different view, the approach that we would submit would be the right one would be for there to be a new trial on the question of damages.

Your Honours, could I come then to the issues which in broad terms arise in the case. The first one, in a sense, is whether the trial judge's assessment should have been set aside. The second was whether the Full Court erred in the course which it took in not granting a new trial or granting some other relief. May I deal with them in that order.

Your Honours, dealing with the position of the trial judge's assessment, the first thing we would submit is to identify what the trial judge was doing and then, of course, what was done by the Full Court. There are a number of aspects involved in that, of course, both substantively and as to the procedural issues that were involved. I will deal with them separately if I may.

Your Honours, it was clear at the trial that the appellant made and maintained the claim for damages on a very particular basis and it was not the basis - and I will come to the detail of that - on which the trial judge found. The basis contended for at trial had changed from the basis contended for by the appellant until a short time prior to trial. Your Honours will see that in volume 5, paragraph 188 at page 1167, where the Full Court referred to "the fact that until some weeks prior to the trial", the claim by the appellant was based on the proposition that we were to carry out the work at actual rates and - - -

McHUGH J: What page is that, Mr Jackson?

MR JACKSON: Page 1167, paragraph 188. To put it shortly, the pleading, until it was amended to the form your Honours have seen, was one that alleged a "cost-plus" contract and that was then changed and the change was to that contended for in paragraph 96, of the, I think, third further amended statement of claim at pages 121 and 122. Your Honours will see, if I could go to the statement of claim in paragraph 96 at page 121 in volume 1 - perhaps page 120 I should go to first.

GLEESON CJ: Now, while you are on page 120, do you agree with Mr Gilmour's explanation of the meaning of that allegation in subparagraph (xiv)?

MR JACKSON: Your Honour, may I say I thought I did but what I meant to convey by that is that there has been a suggestion made to me, which I really need to check during the adjournment, that that is not correct and that there are other relevant factors. For the moment the answer is yes, but may I reserve my position in relation to it. Staying at page 120, your Honours will see in the paragraph (ii) in each of the subparagraphs of the particulars that there is a reference to in paragraph 1(ii), estimated profit of 10.5 per cent. Then your Honours will see when one goes to 2(ii), 3(ii) and 4(ii) that the date at which the profit estimation is being made has changed - changed, going forward - and, of course, the rate of the profit estimation derived from our profit forecasts is one which also changes in accordance with that.

Now, that basis there set out was one which did depend on acceptance of the various profit forecasts that had been made from time to time. That was the nature of the case that was being advanced. Indeed, your Honours, if I could just say something about it, it was, of course, a simple approach. It obviated for the appellant the need to go into detail by reference to evidence of contractual entitlements but it had some disadvantages, namely, that if it did not succeed for any reason the cupboard would be relatively bare in relation to alternatives.

Your Honours, could I pause to say at this point that one does not see at any stage in the case any claim made by the appellant - and when I say "any claim made" I mean either in a formal fashion or by way of submission - that there should be an award of damages which differs from either that claimed originally or that which was awarded by the primary judge. In relation to that, one does not see, for example, a separate claim being made that the 2.7 million plus 5 per cent should be the amount that is awarded. Claims of that kind might have been made but one does not see that ever being made in the case. What one does see, your Honours, is that the claim that was relied on at first instance - and I will demonstrate this a little further in just a moment - was that to which I have just adverted, namely, that set out in paragraph 96.

That that was so at the conclusion of the trial can be seen in the closing submissions which are in volume 3 of the appeal book at page 682. Your Honours will see from the heading at page 682:

SECTION 15

PLACER'S DAMAGES

It indicates, as one might expect, that the written submissions were divided up into various sections. I think only section 11 is the other part that has been reproduced in the Court books.

Your Honours will see in the first place that once again it is said in paragraph 1 that:

Placer says its damages are to be calculated in the same manner -

whatever be, to put it shortly, the relevant cause of action. From there, your Honours, one goes to paragraph 6, and it said:

As a result of Thiess' breach of contract and breach of fiduciary duty, Placer is entitled to its loss of bargain or overpayment. In both cases, this is the difference between the amount charged to Placer and the amount that would have been charged if Thiess had provided Placer with its actual estimates.

Your Honours, so far no one would contest that. Then, your Honours, one goes to paragraph 12 and there is a reference - and your Honours will see, under the heading "Misrepresentation - Deceit":

Placer did not demand that Thiess' actual estimates be provided.

And then the detriment is set out. And from there one goes then to paragraphs 13 and 14 and, once again, your Honours will see in paragraph 13 the proposition that:

To calculate the damages, Placer relies on Thiess' own documents as to what were its actual estimates, namely the Project Forecasts.

And, your Honours, one sees then in paragraph 14, again reliance, in the first sentence on Mr Berrey's report, where he summarised the Project Forecasts and it said:

The percentages of profit calculated by Berrey do not exactly match the amounts included in the Statement of Claim.

Then the correct calculations are set out. Your Honours will see page 684, paragraph (a):

Period 1 August 1992 - 31 December 1992

And paragraph (a)(ii), the profit forecast. Then, if I could go down to (b) on the same page, at the bottom of the page, they say:

We do not have a January 93 forecast. The next forecast is February 93. There is no reason to believe Thiess' estimates would have changed -

Paragraph (c) on page 685:

There was no forecast in April 93 . . . There is a forecast for May - - -

GLEESON CJ: Could I just ask you to pause there for a moment. I am anxious to understand the methodology that is being employed here. Take paragraph (b) that you are on, for convenience. Could you just explain what you understand to be the methodology there?

MR JACKSON: Yes. Your Honour will see that one sees the first item being the progress claims that were made, $6 million-odd, at the bottom of page 684.

GLEESON CJ: That is gross revenue, is it?

MR JACKSON: Yes, progress claims, that is so, your Honour. And then, (ii) at the top of 685, "Thiess' forecast profit" was 14.82%. Therefore the $6 million-odd represents, in effect, 114.82% on estimated costs and that gives, by taking off 14.82%, in that way, 5.284.

McHUGH J: Mr Jackson, I just have not understood for the moment what the accuracy is of this forecast profit. Is this a profit of predictions as to the amount that would be made - - -

MR JACKSON: A prediction.

McHUGH J: A prediction. Now, is there any evidence in the case as to how it turned out in the end, as to one of those profit margins or is it - - -

MR JACKSON: Well, your Honour, that was, to put it shortly, what we were saying, and really succeeded on, at the trial.

GLEESON CJ: Well, it seems to be an amazingly oblique way of getting at what you are after. What you are after is incontestable and it is identified on page 682, paragraph 6?

MR JACKSON: Yes, your Honour.

GLEESON CJ: And then the methodology here seems to be, "We will take their forecast profits and their gross revenue and knowing what their forecast profit percentage was, we will then infer what must have been their genuinely estimated costs"

MR JACKSON: Yes, that is so, your Honour.

HAYNE J: The profit forecast correct to two decimal places?

MR JACKSON: Yes, indeed, your Honour. I was at, I think, page 685, at the top of the page, when the Chief Justice was putting to me - - -

McHUGH J: Can I just ask you this before you go on. When was the forecast made in relation to the period when a genuine estimate or a review was made?

MR JACKSON: Well, your Honour, I do not think it is possible in one answer to that, because there were - and, your Honour, I would need to identify the reviews, but may I perhaps give your Honour a piece of paper indicating that tomorrow, if that is convenient?

McHUGH J: Yes, right.

MR JACKSON: The position was, your Honour, as one might expect, within a large company, there had to be profit forecasts made. These were the profit forecasts. Now, your Honour - - -

McHUGH J: I can understand the use being made of these predictions if, for example, they were contemporaneous with what was put forward as at the review date, or something of that nature.

HAYNE J: And something may turn on whether a percentage figure which we see appearing there is itself a product of calculation of a projection which read, for example, "We expect profit for quarter 1, year X to be $100,000".

MR JACKSON: Yes. Well, your Honour, may I endeavour to give it to your Honour in a fairly succinct form which indicates where your Honours will find it, or if it is not here, endeavour to have the exhibit that it is contained in. Your Honours, the point I was seeking to make was that what one had was a claim, based on a particular basis, which is set out there, namely, the profit forecast, and your Honours a claim made - I say on no other basis of calculation of the damages which was the case advanced on behalf of the appellant.

GLEESON CJ: In fairness to your opponents, may it be that at that stage they did not know and could not know that the most direct source of information about what genuinely estimated costs would be, would be the internal charging that was going on between the plant department and the project?

MR JACKSON: In relation to that your Honours will see - and if I could just give you the reference - - -

McHUGH J: But is this document section 15? Is that after all the evidence is in?

MR JACKSON: Yes. It is part of a large bundle of submissions on various aspects - - -

GLEESON CJ: It is a written address after all the evidence is in?

MR JACKSON: Yes, your Honour, it is part of the written address.

GLEESON CJ: Well, at that stage, they did know, did they?

MR JACKSON: Yes, that is when they - - -

GLEESON CJ: They had had the opportunity at that stage to cross-examine these men who admitted that they deliberately spread this over the entire contract rather than making it obvious by attributing it to a particular item of plant?

MR JACKSON: Yes, the $1.2 million. That is referred to at page 1141. Your Honours, I was going to say two things about it. The first was that what one sees in the final submissions is, in effect, an updated version of what was in paragraph 96, as it says. The second thing is that your Honour asked me, could one see, for example, the plant department rates, and a bundle of them, for a particular week, is shown in volume 3, at page 559.

HAYNE J: Sorry, page - - -?

MR JACKSON: Page 559. If I could take your Honours to that for just a moment. At page 559, your Honours will see the heading:

THIESS CONTRACTORS P/L - INTERNAL PLANT HIRE RATES REPORT by Location For Plant Week 9430 -

and then your Honours will see the date, 20 January 1994 to 26 January. You will see then, the time of the document - the next item in the heading - it is 29 January. Then one sees various - the internal plant is set out, and it goes on for a number of pages, up to and including page 562. So those documents - that is a sample of them for a particular week. I will come, if I may, a little later, in going through, for example, what is set out by the Full Court in the way it says that damages could be calculated to indicate where the various items were obtainable from. Really, your Honours, it is not quite right to take the view that this was a case where we knew everything and they knew nothing. We had to make many reports and there were many reports, claims for money, and officers of the appellant who were in control of the affairs.

GLEESON CJ: Well, that was an aspect of the partnering, a sharing of information.

MR JACKSON: Indeed, your Honour.

GLEESON CJ: As always.

MR JACKSON: Yes, of course. What I was going to say then was that the difficulty was, of course, that the judge did not accept the reliability of the profit forecasts for the purpose of doing the calculation that was sought to be done. Now, your Honours have been taken to, I think, the two references at pages 783 and 919 in volume 4, dealing - - -

KIRBY J: Are your client's written submissions in the collection?

MR JACKSON: Not in the book I do not think, your Honour.

KIRBY J: In the appeal book?

MR JACKSON: I think the answer is no, your Honour.

KIRBY J: May it not be useful to us to know what your client put to the Full Court on damages?

MR JACKSON: Your Honour, I will endeavour to get those for you.

KIRBY J: Because intuitively the result seems an odd one.

MR JACKSON: Your Honour, one would have to say that in circumstances where there was established a breach of contract, because that was the only - breach of contract and fiduciary duty, the way in which it proceeded in the Full Court, the other cause of action not being relied on - and where there was, if I may so with respect, something of a curiosity of nominal damages in tort having been given for the other cause of action, the situation, your Honour, it is a little surprising. However, with the power to - - -

GLEESON CJ: It looks as though it might have been the pour encourager les autres.

MR JACKSON: Your Honours, what I was going to say in relation to it was that no doubt it is perhaps not the course that the court might have taken, if sitting in the court below, not to have ordered a new trial, for example. However, it is a question whether it was within the discretion of that court, whether it was an error in that regard, but may I come back to that.

Your Honours, what I was going to say was that your Honours will see that the judge at page 783 had said that:

it must follow that Thiess' project forecasts and contract valuations cannot be relied on (without adjustment) as providing an accurate assessment of the profit Thiess expected to earn from the new contract alone.

Your Honours, it is clear, in our submission, that the Full Court did not overlook that expression, "without adjustment", because your Honours will see that at the top of page 1171 in volume 5 in the sentence commencing on page 1170, their Honours refer to the fact that he considered they:

were unreliable, largely because they incorporated "unreleased profits" not relating to the contract.

Now, could I just say, your Honours, that our learned friends suggested, "Well, all this is fixed up by what was done by the primary judge at page 925. Your Honours, could we say in relation to that essentially, I suppose, two things. The first is that your Honours will have seen that the approach which was being urged upon the primary judge in relation to the use of the project forecasts was not just that they be the end result of profit. I am sorry, your Honours, I am putting that badly. Your Honours will see that the course adopted by our learned friends' case was to say, "Take these various periods in relation to each of those, use the profit forecasts and this is the figure that you will arrive at from this theory."

What one sees the primary judge actually doing is to take a figure which he regarded as profit at the end of the contract. Now, that is not the same thing as was sought to be done by the appellant.

The second thing about it, your Honours, is that what one sees is that the approach taken by the primary judge left out of account - because it took the whole of the contract, it left out of account a number of matters. Could I instance two of them? One is that there was no complaint made in respect of the balance, I think it was starting in August, of 1992. Now, your Honours will see that at page 921, at the bottom of that page:

However, no complaint has been made by Placer about the plant rates proposed by Thiess for the balance of 1992. These were the internal plant rates. Neither -

and this is another aspect -

has Placer complained about the rates proposed for the PC 1600 excavator. Again, the contract rates were very close to the internal plant rates.

HAYNE J: What is the period referred to by his Honour as being "the balance of 1992", Mr Jackson?

MR JACKSON: Well, first of all, it was to the end of the year. So that, your Honours, one had a situation where the course that was ultimately adopted by the primary judge was to take a whole of contract approach to it and, in our submission, that was one that had some unsatisfactory aspects.

Your Honours, the other thing we would seek to say is that the original method that was sought to be applied by the appellant was not pressed in the Full Court, nor was any other method other than that which was adopted by the primary judge in the end. Could I say in relation to that that there were no notice of cross-appeal. We had appealed to the Full Court and there was no notice of cross-appeal seeking to say, for example, that the judge should have applied the test that was contended for by the other side, nor was there any notice of contention to that effect or to the effect that there should be some other method of assessment of damages applied.

If one goes to the observations of the Full Court in volume 5 at page 1170, your Honours will see about line 6:

It followed from that finding -

that is about the project forecasts -

that the basis on which Placer sought to establish its claim at the trial failed. This conclusion by his Honour was strictly in accordance with the pleadings and the arguments advanced by both parties. There is no complaint by Placer as to this conclusion. In this appeal Placer seeks merely to support the alternative approach that the learned Judge adopted to its damages claim.

Also, at page 1171 their Honours say - this is the line behind 6 on page 1171 and my learned friends referred to this passage. Their Honours say:

It was occurred to us that there may be evidence from which -

you are to work out -

unrelated profits -

and so on. But then they go on to say at about line 10:

This possible method does not appear to have been addressed at the trial, and we received no submissions in - - -

GLEESON CJ: Just pausing there, Mr Jackson. I may not have accurately understood what is being discussed in that paragraph, but why, consistently with the criticisms the Full Court had made of the trial judge's method up to there, do they accept that if there were:

evidence from which the maximum amount of unrelated profits and the minimum amount of profits from the Granny Smith contract could be determined. That would enable a damages figure to be assessed substantially in accordance with the way in which Placer conducted its damages case at trial.

MR JACKSON: Well, your Honour, our learned friends' argument may really be reading too much into what their Honours are saying. Their Honours are not really expressing, in our submission, a view that that would be an appropriate result, but saying that you could get the calculation in the way they contended for. I appreciate that what it said there is capable of two meanings, but, consistently with the approach taken by the Full Court, we would submit, what their Honours are simply saying is that it has not been - as they said on the preceding page, it has not been sought to say or sought to defend the approach taken at trial.

It may be, if one looked through the evidence, one could see what the actual results of it would be, and that would allow damages to be assessed in accordance with that way. But we are not actually saying, in our submission, that that is the right way of doing it. We would also refer to the next paragraph, 199. The judge was not asked to deal with Placer's damages in any way other than that pleaded in the statement of claim, and on appeal, no attempt was made to justify a damages award on a basis different to that adopted by his Honour.

Your Honours will see, in our submission, that this was a case where, rightly or wrongly, so far as the appellant was concerned, a very particular approach to the calculation of damages was adopted. Could I in that regard pause to say that there is nothing unusual, in our submission, in the case of a plaintiff who has adopted a particular method of claiming damages but fails to establish the factual substratum for that, not having damages assessed on some other basis. That can be seen, your Honours, in a number of cases in this Court and in intermediate appellate courts.

Could I refer your Honours to two decisions of this Court. The first is Ted Brown Quarries Pty Ltd v General Quarries (Gilston) Pty Ltd (1977) 16 ALR 23. Your Honours, that was an action for deceit. The vendor of a quarry had sued for unpaid purchase moneys, the purchaser counterclaimed successfully for damages for deceit. The purchaser said that the resource which it had acquired, namely various agreements and the right to quarry on the land, had no value. It called an expert to that effect. The evidence of the expert was rejected - he was a Dr Solomon. The trial judge, in a sense, doing the best he could, said the resource was worth $100,000 and the issue was whether that could be sustained. Could I refer your Honours to Justice Gibbs at page 37 - - -

HAYNE J: I thought you would take us to the first paragraph of Chief Justice Barwick's judgment?

MR JACKSON: We were dissenting actually, your Honour.

HAYNE J: Yes, but I thought you might urge it upon us. Anyway.

MR JACKSON: Your Honour, perhaps we are passed that but it is a thought for your Honours to bear in mind, and it is short, perhaps, with respect.

May I say, going to Justice Gibbs at page 37, your Honours will see about line 24:

Once the learned Chief Justice rejected Dr Solomon's evidence that the resource was worth $600,000, he was left with no evidence of what its value was. It was put to us that he was entitled to make a "jury assessment" . . . But that would only be possible if there was sufficient evidentiary material to enable the court to do so.

I will not read out the passage but could we invite your Honours to read the remainder of that paragraph and your Honours will see towards the end of the paragraph the view that it:

was not unreasonable to expect General Quarries to call acceptable evidence as to the value of the "resource" . . . failed to discharge the burden of proof -

Could I also invite Your Honours to note, to save me going back to it, that in the last four or five lines Justice Gibbs said he had had in mind to order a new trial but that he, in the end, agreed with Justice Aickin whose reasons I will come to in a moment, that that would not be the proper exercise of discretion to do so. Your Honours, Justice Aickin - - -

KIRBY J: Of course, Chief Justice Barwick favoured, if necessary, as an anomalous solution - regarding the outcome as anomalous - that is at 27.

MR JACKSON: Yes, your Honour, it seems to have been - - -

KIRBY J: There is a certain parallel between this case.

MR JACKSON: Yes, there is, your Honour. Yes, indeed, and no doubt a court of five does not have to follow the majority of a court of three.

KIRBY J: I wonder why it was not reported in the Commonwealth Law Reports.

MR JACKSON: Probably because it was a court of three, your Honour. It was a sort of transitional period, as it were. Your Honours, could I refer to page 38 - Justice Aickin. Perhaps, also, your Honour, because it was really stating the obvious in a sense. Justice Aickin, in the second paragraph of his reasons, about line 13 said:

There is no doubt that in the circumstances the burden of proof lay upon the purchaser . . . General Quarries called no evidence as to the value of the "resource" at the time of its purchase.

Then your Honours will see - and the passage goes down to about line 31 and his Honour then, commencing at about line 32, goes on to the question of a "new trial" and said, about line 35:

There is no doubt that the court has a discretion to order a new trial. The trial was unsatisfactory in some respects, but that situation arose from the failure of General Quarries to call evidence on a critical issue -

which he identified, and then your Honours will see in the next paragraph that it:

failed to avail itself of the opportunities to deal with this matter at the trial and I do not think that in the circumstances it is a proper exercise of this court's discretion -

Your Honours, I see the time.

GLEESON CJ: Yes.

MR JACKSON: I expect, your Honour, to be about an hour and a half.

GLEESON CJ: What would distinguish this case from Ted Brown might depend on what you could make of that 2.7 million plus 5 per cent.

KIRBY J: I have a feeling this was read to us in another case. Has it been noted in any more recent decisions that you are aware of - - -

MR JACKSON: Your Honour, the passage from Justice Aickin I read was adverted to in the Full Court of the Federal Court in a case I was going to refer to which is Radferry v Starborne Holdings. It is an unreported decision. We have given your Honours a copy of that decision. It is a 1998 decision of the Full Court of the Federal Court.

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

MR JACKSON: Thank you, your Honour? Your Honours, perhaps I should mention I was going to refer to two other cases on this point. One is the other decision in this Court, that is Luna Park [1938] HCA 66; 61 CLR 286 at 300, 301, 307, 311 and 312, and a decision of the New South Wales Court of Appeal, Scott v Echegaray (1991) Aust Torts Reports 81 - 120.

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

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

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

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

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

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

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

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

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

MR JACKSON: Yes. That finding your Honour is referring to has to be borne in mind. There was one made in circumstances where our figures were gone through with, as it were, the fine-toothed comb and, that having been done, we were then squeezed a little more, as it were, and the result was that we were dealing with a party which was deciding whether to mine itself, as it did in other places, or to continue with us.

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

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

GLEESON CJ: We will adjourn until 10.15.

AT 4.23 PM THE MATTER WAS ADJOURNED

UNTIL WEDNESDAY, 11 SEPTEMBER 2002