Cessnock City Council ABN 60 919 148 928 v 123 259 932 Pty Ltd ACN 123 259 932 [2024] HCATrans 8 (13 February 2024)

Last Updated: 14 February 2024

[2024] HCATrans 008

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S115 of 2023

B e t w e e n -

CESSNOCK CITY COUNCIL ABN 60 919 148 928

Appellant

and

123 259 932 PTY LTD ACN 123 259 932

Respondent

GAGELER CJ
GORDON J
EDELMAN J
STEWARD J
GLEESON J
JAGOT J
BEECH‑JONES J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON TUESDAY, 13 FEBRUARY 2024, AT 9.59 AM

Copyright in the High Court of Australia
MR J.T. GLEESON, SC: May it please the Court, I appear with MR L.G. MORETTI for the appellant. (instructed by Holding Redlich)

GAGELER CJ: Thank you, Mr Gleeson.

MR D.L. WILLIAMS, SC: May I please the Court, I appear with my learned friend MR B.D. KAPLAN for the respondent. (instructed by Dentons Australia)

GAGELER CJ: Thank you, Mr Williams. Mr Gleeson.

MR GLEESON: Your Honours will see from our outline that I propose first to address the law, which is paragraphs 2 to 9, before coming to the very arresting facts which bring this matter to the Court. To provide focus, if the Court could have page 148 of the core appeal book, paragraph 73 of the Court of Appeal, which sums up much reasoning that has gone before. Paragraph 73, we submit, does not accurately state Australian law for the recovery of damages for loss of contractual benefits measured by “wasted expenditure”.

It is wrong to the extent that it purports to state a principle that applies to, firstly, all contracts, without further inquiry; secondly, all forms of expenditure in reliance upon a contractual promise, without further inquiry into the nature of the expenditure, including whether it is essential or incidental reliance.

GORDON J: Sorry, without ‑ ‑ ‑

MR GLEESON: Without further inquiry into the nature of the expenditure including whether it is essential reliance or incidental reliance as I have explained. And thirdly, the third last line:

whether under or dehors the contract.

It is overly general in that it applies a presumption to forms of recoupment not coming under the contract but coming dehors the contract from separate ventures conducted by the innocent party. Fourthly, it is wrong because it erects a presumption of law passing a burden on the balance of probabilities to the contract breaker to prove, as a past hypothetical fact, that the expenditure would have been wasted in any event. Your Honours, that is the focus for the legal submissions, but if I could come to our outline.

GAGELER CJ: Mr Gleeson, you are addressing Australian law, obviously, but are you saying Australian law is different from English law and United States law to which your opponent draws attention?

MR GLEESON: It is certainly different to United States law, and the difference I will come to under our proposition, paragraph 3. In respect to English law, there was a significant difference, as a number of the earlier English authorities, including those discussed in Amann, were overly heavily influenced by the United States approach and, while somewhat imprecise in places, might be read as shifting a legal onus, in places might be read as not fully investigating the more precise questions we identify, albeit since about 2010 at least, in the Yam Seng decision, English law has conformed more closely to Australian law by saying not only is Robinson v Harman the governing principle but the onus rests on the innocent party to prove what we submit in paragraph 2, which is if the contract had been performed the innocent party would have been in a better position in some identifiable and quantifiable respect than its actual position following breach. So, conformity between Australia and the United Kingdom has increased.

EDELMAN J: When you talk about the United States law, are you talking about just the more recent decisions in the United States law? Because Albert v Armstrong Rubber, on one of view of it, is just expressing absolutely conventional expectation loss and then applying a substantive legal onus to it, and that was picked up in Amann Aviation.

MR GLEESON: Yes. Can I address your Honour’s question very shortly, under paragraph 3, because I wish to go to that case in some detail. So, all we wish to say in respect to paragraph 2 is that it is our submission that, given Robinson v Harman is the governing principle and given the onus of proof, it remains on the innocent party at all times to prove it would be in a better position in some identifiable, and ultimately quantifiable, respect than its actual position following the breach. We submit that there is a never shifting of a legal onus of proof in the aspects that we are concerned with in this case.

Now, in terms of authority, we would take the Court to Berry v CCL Secure Pty Ltd [2020] HCA 27; (2020) 271 CLR 151, which is volume 1, tab 4, page 38, for the discussion in paragraph 28 in the judgment of three Justices. Admittedly, in the context of section 82 of the Trade Practices Act but by reference to footnote 45, picking up Amann, thus stating a more general principle as to where the legal burden rests. By contrast, paragraph 29, recognising that there may be a shifting of the evidentiary burden in appropriate circumstances.

I will come back to 29, but our submission on 29, when it refers to Amann Aviation – firstly referring to five judgments in footnote (51), and then, in particular, Justice Brennan in Amann – it is in the context of the shifting of an evidentiary onus, not a legal onus. In particular, your Honours will pick up on page 170 of the Commonwealth Law Report, at about point 5, that if the presumption arises:

it was just that the Commonwealth should bear the ultimate onus of proving at least a prospect that Amann’s returns under the contract would not have been sufficient to recoup that expenditure.

We emphasise “prospect”, not “balance of probabilities”. We submit that paragraph 29 is useful because it has brought these – misleadingly called – reliance damages into direct comparison with expectation damages measured on the loss of a chance.

EDELMAN J: It is not entirely clear what the words “at least” are doing, though. Whether that is at least a requirement of proof of a prospect, and possibly a requirement of proof of more than that, or whether that is discharged by proof of a prospect.

MR GLEESON: We submit the latter, your Honour.

BEECH‑JONES J: Mr Gleeson, paragraph 30, it says:

either of the presumptions –

plural:

considered in Amann –

What do you say that is a reference to? That is not a reference to an evidential and legal, you say it is something else? If you are coming to it, I do not want to take you off.

MR GLEESON: Your Honour, our answer is that it is a reference back to the bottom of page 169, where the sentence reads:

One relevant modern application of that principle is reflected in this Court’s decision –

And then the footnote picks up a number of the judgments, the second, we read – we think – as Justice Brennan’s version of it, which is the narrower version, that it is only where the breach has rendered it impossible to carry out the assessment on the ordinary basis that there is any shifting of onus.

GORDON J: I had understood that it was the rebuttable presumption put at the top of 170 was the first one, is it not, and then the second way is the way in which Justice Brennan puts it, and both of those are said by Berry to be sufficient in this case.

MR GLEESON: Yes – in our case?

GORDON J: No ‑ ‑ ‑

MR GLEESON: In Berry?

GORDON J: For the reason it is unnecessary to invoke either of the presumptions in Amann, being the way put first, the rebuttable; and in the second, the way in which Justice Brennan puts it.

MR GLEESON: We agree, your Honour. Before leaving Berry, the distinction between the legal onus never shifting and the evidentiary onus potentially shifting back and forward is found at paragraphs 65 to 66 in your Honour the Chief Justice and Justice Edelman’s joint judgment. Again, stated in a context of the statutory claim, but, we submit, reflective of the same principle in the law of contract.

EDELMAN J: Do you say that it would have been enough in Armory v Delamirie – to which, I think, paragraph 28 or 29 referred – for the respondent to have demonstrated that there was a prospect that the jewels might not have been worth very much money?

MR GLEESON: Potentially, yes, once one worked through what was the ordinary measure of damage and then precisely how was the damage meant to be proven on some alternative basis. Your Honours, can I come, then, to our proposition 3 and the United States.

GAGELER CJ: Before, perhaps, you come to proposition 3 – just in relation to proposition 2, why is the innocent party not worse off compared with the position as it would have been if the contract had been performed, simply by having wasted expenditure?

MR GLEESON: Because that has not embarked upon the enquiry, if the contract had been performed, would you have wasted that expenditure in any event? And that enquiry might lead you to look at the performance of the contract itself. That is what Fuller and Perdue call “essential reliance”; it is where I do things, in performing or preparing to perform the contract, expecting that I will get recoupment from the other party, usually by payment of the contract price. So, if I have incurred the expenditure, it may well be wasted, in any event, if I do not get back sufficient receipts under the contract, allowing for all my other expenses.

GAGELER CJ: So, the plaintiff has to prove not only wasted expenditure but that it would not have been wasted if performance had occurred?

MR GLEESON: We submit that is the legal onus of the plaintiff, and that legal onus never shifts. So, in the present case, they say we spent $3.7 million on a hangar. We submit the legal onus never shifts to prove that, had this contract played out, they would have got back sufficient receipts.

GAGELER CJ: Why should the evidentiary onus not shift?

MR GLEESON: The evidentiary onus may shift – may shift – but before I expand on that ‑ ‑ ‑

GAGELER CJ: I am sorry.

MR GLEESON: No, your Honour, I said recoupment. There are two forms of recoupment which have been completely glossed over in the Court of Appeal’s paragraph 73. The second situation which Fuller and Perdue call “incidental reliance” is where the expected recoupment is not out of the contract with the other party, nor out of, as in McRae, an asset which is promised to exist under the contract. But it is under the conduct of a separate business which – albeit needs this contract in the background in order to allow it to run – it is ultimately whether that separate business succeeds or fails that will determine whether the expenditure is truly wasted.

EDELMAN J: But ultimately, we are always talking about consequential losses in this sphere, are we not? If we are talking about consequential losses, why does it matter if the consequential loss was incurred directly in reliance on the performance of the contract, or indirectly in reliance upon that?

MR GLEESON: Well, it can matter critically. Once we are in the field of the shifting of an evidentiary onus – your Honour the Chief Justice put that to me, and I accepted that can occur, and in some cases will occur fairly readily – one asks, what is the presumption about ordinary behaviour, ordinary commercial behaviour, which allows one to assume, absent something different, that the expenditure would have been recouped?

If one is looking at essential reliance with recoupment from the counterparty, the view expressed by Chief Justice Mason, Justice Deane, doubted by Justice Gaudron, Justice Toohey and Justice McHugh, and not really commented on by Justice Brennan, was that ordinary expectations of commerce might set up an assumption that if I am supplying goods or services for a contractual price, I have built into my expected recovery return of my expenditure, either under the first contract or under a subsequent contract. So, if one is in the field of an evidentiary assumption and commercial expectations, that is the type of reasoning. Our point is that whether any such assumption can be made requires close attention to the particular contract and the particular expenditure.

If what you are saying is, I am entering a contract with you where you are promising to take steps which are likely to lead to me getting a 30‑year lease under which I will be paying rent every year, where I am going to spend $3.7 million on a hangar and where my recoupment, if any, is not going to come out of the lease, it is going to come out of such businesses as I choose to operate over that 30‑year period, one immediately asks, why would the evidentiary onus necessarily shift and, if it shifts, with what degree of force does it shift? So that is why, your Honour Justice Edelman, the nature of the expenditure and the intended recoupment can be critical in terms of understanding if an evidentiary onus has shifted.

EDELMAN J: That assumes, though, that the rationale underlying a reason for a shift in the evidential onus is, as you have put it, an expectation, effectively, that people will recoup their expenditure. But there may be difficulty in modern commerce with saying there should be any presumption that parties will recoup their expenditure in commercial contracts. There is another justification for a shift in the evidential presumption, and that is the Armory v Delamirie one, which is that if you, as a contract‑breaker, have made it much harder for the other party to prove their loss, then the evidentiary onus ought to shift to you.

MR GLEESON: I accept that, your Honour.

EDELMAN J: And that rationale would not differentiate between the two different types of expenditure, would it?

MR GLEESON: It would, your Honour. What it will require is a close attention to the terms of the contract to see how the risks have been allocated under it, and what effect the defendant’s breach truly has had on it, the ability to value the promised thing before or after the breach.

Now, in the present case, immediately before the breach, if you were seeking to value the promise, it is possible, in theory, to value a lease, it is difficult in practicality to value a 30‑year lease wholly dependent on the success of businesses being run dehors the contract. The point Professor Lücke makes in his article in volume 5 is that in this type of case it is no more difficult after the breach than before the breach to value that lease – it is always difficult but not impossible.

Now, the Armory v Delamirie principle, in other words, your Honour, needs to be applied to the type of contract and to the type of breach and to the type of effect it truly has had.

GLEESON J: And that point about the type of breach, I think, is significant in terms of dealing with the point that Justice Edelman asked you about, which was whether or not evidence of a prospect would be sufficient. In the Armory Case, as I understood it, the party in breach deprived the plaintiff of any means of proof of the value of the jewels. So, how could a proof of a prospect that the jewels were lacking in value be a sufficient response to that breach?

MR GLEESON: I accept that, your Honour. One looks to the particular breach. I think I interrupted your Honour the Chief Justice, who was asking me another question.

GAGELER CJ: I suppose my question is really at the conceptual level, Mr Gleeson. Part of the way you seem to be framing your argument would be to treat reliance damages as a kind of proxy for expectation damages. So, one is always comparing one with the other.

If you just take a really simple scenario of a non‑commercial contract, a procurement contract by, say, a government department – the contract is for the provision of computer equipment and, in reliance on the contract’s future performance, the department installs brackets to hold the computers. The computers are not then delivered, there is repudiation of the contract, there is wasted half a million dollars on brackets that will never be used. Why is it not just sufficient to say, well, that is just wasted expenditure in the expectation of the contract being performed?

MR GLEESON: The answer is, your Honour, that is the approach that is taken in the United States because of a view that one is protecting a reliance interest within contract. And one of the key questions that Amann had to face was, how would that approach be reconciled with Robinson v Harman? The decision made across every judgment in Amann is to say, no, you are not protecting that reliance interest in contract. You may be protected in tort or under the statute, but in contract one must always come back to saying, would you have recovered that expenditure had the contract been performed?

BEECH-JONES J: Mr Gleeson, in the example given by the Chief Justice, the department would never be recovering profit though; it is not that type of contract which they would ever be expecting to, as it were, recoup.

GAGELER CJ: Justice Beech-Jones, it might be necessary to speak a little louder.

BEECH-JONES J: Sorry – in the example by the Chief Justice, that is not an example of a contract of which there would ever be – the department would ever be expecting to get revenue, or may not be, depending on what they are doing.

MR GLEESON: I accept that is a difference, your Honour.

GAGELER CJ: Mr Gleeson, would you say, in the example – and I am sorry to be using a hypothetical – but would you say in that example that money spent on the brackets is just not recoverable in contract?

MR GLEESON: No, but to be recoverable it has to be reconcilable with Robinson v Harman, and that has to require some comparison – allowing for the nature of the contract, allowing for whether it is a profit-seeking contract or not – some comparison with your position had the contract been performed.

GAGELER CJ: Why is the position just not, if the contract was performed, the expenditure would not have been wasted; the contract is being repudiated, the expenditure is wasted. Why is that just not the counterfactual analysis?

MR GLEESON: Well, it may depend on your Honour’s precise example. And one of my propositions is one needs to look at the nature of the contract and the allocation of risks under the contract. If ‑ ‑ ‑

GORDON J: I speak only for myself, but that proposition is at just too high a level of generality.

MR GLEESON: What I am trying to indicate is, if it is your Honour’s example, that it is a contract to supply equipment and in reliance upon that, brackets are purchased, one would be looking at the contract to see what provision it had made, first of all, for these eventualities.

GORDON J: What eventualities?

MR GLEESON: The one that is now complained about – namely, that you have spent money on brackets which you have not recovered. But one will then immediately, of course, be looking at mitigation as well, which is, can you do anything with the spare brackets?

GAGELER CJ: Of course.

MR GLEESON: That will be taken into account, but one still has to say, what position would I have been in had this contract been performed?

GAGELER CJ: What is the analysis that would be required in my simple example, on your submission?

EDELMAN J: Would not the answer under the sale of goods legislation simply be that you were given an amount of money to enable you to purchase exactly the same type of computers, or as close as possible to the same type of computers, as you had contracted to purchase?

MR GLEESON: That was the answer I was going to give, as the normal measure of damages for the failure to deliver goods is what sum of money do you need to recover the replacement goods? If there is a market, you go out and buy them in the market. If they cost you more, you recover that as part of your damage. But if you follow that example further, that may tell you where the cost of the brackets fits into the exercise. Your Honours, can I deal with the United States. The starting point ‑ ‑ ‑

EDELMAN J: Just by that response, you mean if it costs more to buy computers of a different size because of the brackets that have been installed then you can recover that additional amount as consequential loss?

MR GLEESON: Yes, but had the contract been performed, you would have had computers. So, you can be recompensed for the failure to have the computers you were expected to get, and then the cost of your brackets is a cost you are wearing as part of the business or government you are conducting. Now, your Honours ‑ ‑ ‑

BEECH-JONES J: So, is the outcome a pure reliance loss or recoupment case does not arise on that example?

MR GLEESON: Correct, and correct save for McRae.

GORDON J: I was going to say, you have to deal with page 89 of Amann and Chief Justice Mason’s ‑ ‑ ‑

MR GLEESON: Yes, I am going to come to McRae and Amann, and my answer to your Honour Justice Beech‑Jones was yes, because, as the question was framed to me – was recovery of the expenditure, as reliance, expenditure – that is not what is done. What is possible – if you could not prove the cost of going into the market to get the replacement computers, if there were no replacement computers available – so, you then just have a bare fact of expenditure – if they be the facts, you are then saying one of two things.

If it is McRae, which is our paragraph 5 – if it is a case where the defendant’s breach has rendered it impossible to assess the damages on the ordinary basis, the law may permit, as a starting point or a prima facie measure, which is the way Chief Justice Dixon described it, reference to something alternative, namely, the cost of the brackets, passing an evidentiary onus over to the defendant to ‑ ‑ ‑

EDELMAN J: Well, even then, it would not really be the cost of the brackets, it would be something like the cost of removing the brackets and installing something that is equivalent to a computer.

MR GLEESON: It may be that, but that would be an example where, consistent with Robinson v Harman – but if it be the case that the defendant’s breach has made it impossible to measure it on the ordinary basis then the evidentiary approach may allow the plaintiff to put up something less than perfection and cast some sort of evidentiary onus on the defendant. That is one qualification of the answer.

GORDON J: And you accept that the rationale of that is that the expenditure has been incurred in reliance on the promise by the defaulting party, which is the way ‑ ‑ ‑

MR GLEESON: Plus, it is the default in the McRae case; it is the defaulting party’s breach of contract that has rendered it impossible to do the assessment on the ordinary measure of damages consistent with Robinson v Harman. It is that bit I add, your Honour, which, with respect, Justice Brereton has left out of his analysis of McRae.

EDELMAN J: But the word “impossible” may be to elevate it, (a), higher than most of the authorities place it and, (b), higher than, in almost every case, would exist. There is almost nothing that is impossible of proof in a counterfactual world.

MR GLEESON: Your Honour, consider McRae and consider what Chief Justice Dixon was saying: the ordinary measure of damages for the non‑delivery of goods is the value of the goods either go into the market, or otherwise value the goods. To take up Justice Gleeson’s question, where the particular breach is – you had warranted the tanker existed at a certain site and there was no tanker – it is impossible to carry out the ordinary measure of damages because you cannot value a non-existent thing. That is why the Chief Justice used the language “impossible”. What he then said is, I would allow you to set up something else a starting point, which is your expenditure in reliance upon the promise.

Now, that cast an evidentiary onus on the Commission, not a legal onus. The reason it was evidentiary was it was impossible for the Commission to prove the value of the tanker – there was no tanker – but it was not impossible for the Commission, on different facts, to do other things, such as prove the plaintiff’s business had hopelessly failed and it was going to be unable to complete the salvage. So, that is why “impossibility”, as used by Chief Justice Dixon and in Justice Brennan’s view, is a correct statement of: has the breach made it impossible to do it on the ordinary basis? That is a reason to allow this evidentiary process to start to shift.

EDELMAN J: And was the joint judgment, I think, in Murphy wrong to say impossible, or difficult or very difficult, to prove?

MR GLEESON: Well, I accept, your Honour, that there are shades of the ‑ ‑ ‑

GORDON J: I think there is impossible, there is certainty; very difficult, difficult.

MR GLEESON: There are shades there, but it is referable to the breach creating a difficulty which was not otherwise inherent in the contract.

BEECH‑JONES J: Mr Gleeson, does the degree of difficulty go to the strength of the evidentiary shift, as it were?

MR GLEESON: Yes. It will be very relevant to not only whether it arises, but what will be needed to, quote, rebut it, end quote.

BEECH‑JONES J: So, if it is impossible it becomes practically heavy, and it if it is difficult it is not as heavy, as it were.

MR GLEESON: It will be part of that inquiry. We have given your Honours the first Restatement of Contracts 1932, section 333: this was the statement of United States law immediately prior to the article by Fuller and Perdue. It is the Restatement referred to by Chief Judge Learned Hand in L. Albert & Son. Section 333 was a limited protection of the reliance interest, limited to:

expenditure, reasonably made in performance of the contract or in necessary preparation therefor –

Subject to limitations, including you cannot recover in excess of the full contract price. So, returning, your Honour Justice Edelman, as to whether a distinction between essential reliance and other reliance matters, it mattered a great deal in this statement of United States law. You see the shifting of the burden of proof in paragraph (d), but everything is referable to the contract price as the cap on the expected recoupment. If your Honours then go to volume 5 to Fuller and Perdue ‑ ‑ ‑

GORDON J: Was that in an environment where that limitation reflected the commercial arrangements at the time? Some of the examples that you have given us this morning about the difficulty – and I use that not in the sense we have just been discussing it, but to take the word “difficulty”, the more complex requirements of valuation – for example, 30‑year lease, establishment of businesses – but that is not what that is talking about.

MR GLEESON: That is not what it is talking about, and my point was, to the extent there was some recognition of what you might call a reliance interest here, it was narrow. It was directed to the things I do under the contract to prepare to perform the contract in expectation of a price. I can recover them as my reliance, subject to the price being the ultimate limit of the damages. My point is that was United States law as re‑stated; tolerably narrow. That is what Fuller and Perdue wanted to travel well beyond.

EDELMAN J: Sorry, was there a justification given in any of the commentary for the full contract price being the cap?

MR GLEESON: Well, perhaps comment d.

GLEESON J: I am sorry, I have not found comment d.

MR GLEESON: Comment d, on page 527.

GLEESON J: Thank you.

MR GLEESON: The whole assumption is a tolerably narrow factual context. I am providing goods or services in exchange for a price, and I am allowed my expenditure, subject to the contract price being the cap. Now, volume 5.

GORDON J: Sorry, before we go there, can I just ask you to go to page 527, and the bottom of 526, which is this cap – it is a different point, I think, and it is picking up the point I just raised with you about the difficult of proof of value of profit, et cetera, which is the justification and rationale for, in a sense, the rule itself. In other words, you are:

entitled to expenditure plus profits –

but your:

inability to prove profits should not deprive him of his right to the proved expenditure, so far as this expenditure was provident and reasonable and is not already compensated for in usable materials on hand.

Am I missing something, Mr Gleeson? I am sure I am.

MR GLEESON: All I am seeking to do at the moment is position where United States law was in 1932, and I am indicating that – and we do not say that is Australian law. To the extent this suggests there is a shifting of the legal onus, if that is what it is saying, we do not say it reflects Australian law. At most this should be understood as an evidential shifting of the burden. But it is in this particular context of essential reliance where the expenditure is intended to be recouped out of the contract and, yes, because there may be difficulties in proving the performance of the contract, some sort of burden is shifting to the defendant, subject to the contract cap.

GAGELER CJ: If you just take the chapeau, leave a, b and c aside, the chapeau and the qualification in d, it looks pretty much like McRae’s Case, does it not?

MR GLEESON: The chapeau is McRae’s Case. What is missing is the tighter filter in McRae, which is that the defendant’s breach has rendered it impossible to prove the damages on the usual measure. If that were added as an integer in the principle, then it is McRae.

GORDON J: That is what I am taking you to at 526 to 527. It may not be in the principle, but at least that explains why it is there. It says:

Frequently it is very difficult, and at times it is impossible, to prove . . . It is in these cases that the rule of the present Section is essential to the plaintiff’s case.

MR GLEESON: It is close, your Honour, it is not identical. I have to beg to differ. It is not identical because McRae is – it is the breach by the defendant rendering it impossible – or let us say very difficult – to prove the damages on the usual measure. So, what is at the bottom of 526, top of 527, covers that case, but it is a little broader, the way it is expressed.

GORDON J: Thank you.

MR GLEESON: So, in volume 5, commencing at page 1318, which is tab 42. At the foot of 1318, Fuller and Perdue refer to:

the “normal” rule of contract damages (which awards to the promisee the value of the expectancy –

What we would regard as Robinson v Harman, and the whole of this article is directed to saying that, really, overlooks or conceals what ought to be going on here. At the foot of page 1319 there is a commencement of a discussion of a reliance interest.

GAGELER CJ: What page of the article is it?

MR GLEESON: Page 53, foot of the page, the commencement at the proposition “First”, the identification of reliance on the promise, and at page 54, at point 3:

Secondly, the plaintiff has in reliance on the promise . . . changed his position. For example, the buyer under a contract for the sale of land has incurred expense in the investigation of the seller’s title, or has neglected the opportunity to enter other contracts. We may award damages to the plaintiff for the purpose of undoing the harm which his reliance on the defendant’s promise has caused him. Our object is to put him in as good a position as he was before the promise was made.

This is the reliance interest. Now, the reason, when your Honour the Chief Justice gave me that example, I was attempting to answer that through the Fuller and Perdue argument, one is protecting the reliance, even though we are in contract, and really, that is the beginning and almost the end of the matter. What Fuller and Perdue were seeking to do was to say that the first edition of the Restatement was too narrow. One had to go beyond what they called “essential reliance” and capture other forms of reliance for this purpose, which we would regard as a tort purpose – restitutio ad integrum.

GAGELER CJ: Yes, I suppose what I was putting to you is whether that justification is the only justification for recovery of reliance damages, and whether they might not be equally recoverable if the question is put in terms of performed contract and repudiated contract, rather than contract, no-contract, which is obviously a tortious kind of measure.

MR GLEESON: I accept that is the field we are in, if we are in any field. I am simply seeking to ascertain and then clear it away – and I will come back to it – that at the heart of the Fuller and Perdue project was a tort approach, and because it was a tort approach this is our submission. That opened the frame to a much wider series of reliance expenditures. It justified the idea of a legal onus shifting, as opposed to an evidentiary one, and it cast on the defendant, taken to its fullest extreme, the burden on the balance of probabilities of proving that which in most cases would be difficult or impossible to prove, e.g., how would you have performed in your other businesses over 30 years? It is that expansion, as advocated through Fuller and Perdue, which, we say, does not reflect Australian law.

EDELMAN J: Well, they also then had to shoehorn expectation interest into reliance interest.

MR GLEESON: I am sorry, your Honour?

EDELMAN J: They then had to shoehorn the expectation interest into a reliance interest, so it becomes almost the mirror image of what the Court was saying in Amann. Its expectation interest becomes a proxy for reliance, rather than reliance being the proxy for expectation.

MR GLEESON: I agree with your Honour. The Fuller and Perdue point is all common lawyers have filled themselves. We are really protecting reliance because it is a higher‑grade interest than expectation, but the cases discuss it as expectation, so we should more be honest and call it reliance. Then what we do is put a cap on the reliance interest by reference to the expectation interest, and therefore we have not offended principle. Now, that is what your Honours see, for example, at page 60 of the article, last paragraph, and then, critically, at page 73, last paragraph, they start to introduce the distinction between essential reliance, where they say the suit could be seen a resting on expectation or expectation plus reliance.

GORDON J: Where are you reading, please?

MR GLEESON: Foot of page 73.

GORDON J: Thank you.

MR GLEESON: And then the foot of 74, they discuss a case where the two interests tend to emerge. And then at 75, they start the discussion whether the expectation interest sets the limit of recovery. Critically, if I could go to 78 through to 80, at the top of 78, they say there needs to be a distinction between the two kinds of reliance, and then they explain what essential reliance is, and they say:

if we do not limit recovery by the “contract price” we are permitting the plaintiff to shift to the defendant his own contractual losses –

Now, that first full paragraph on 78 is relatively similar to the 1932 first Restatement. Then they go to what they call “incidental reliance”. They refer to a very old case of Nurse v Barns – we can give your Honours a copy if you need it, there is no reasoning in it – where they say, well, you cannot limit the reliance interest by the contract price. What you then need to do is to create a different limit, and the limit is you cannot recover more in reliance than you would have recovered had you succeeded in your separate businesses.

They acknowledge, candidly, at the top of 79 that limit is going to be of little assistance because it will seldom be possible to judge the fate of the separate venture. Now, that is our case. That is our case. That is why Justice Toohey and Justice Gaudron said you do not shift anything more than an evidentiary onus. But where Fuller and Perdue got is that where it is incidental reliance, you are directly protecting the reliance interest but – you are imposing a cap, but the cap is by reference to what would have been recovered under the separate businesses. That is what they call the “subjective” expectation interest – that is point 4.

Then your Honours will see the classic formula in italics – which is picked up in later cases – but it is a conclusion which has wrapped up their approach to both essential reliance and incidental reliance. We submit that is not Australian law. So, that is Fuller and Purdue.

Finally on page 89 – perhaps 88 first – they again make the point about the limit they urge for incidental reliance. Then at 89 they that distinction is not found in the Restatement and they argue the Restatement has to be rewritten.

Next in the chronology, if your Honours could go to the decision of Chief Judge Learned Hand, which is volume 2, tab 20, L. Albert & Son, page 519 of the book. It was a claim for damages for late delivery. At the foot of page 188 of the case report itself, in paragraph [12], the damages which were sought were, relevantly:

the cost of the foundation –

which the purchase had laid for the “Refiners”. So, in order to get ready to accept delivery, which was their basic obligation, they laid out some money on some refiners – that is what they sought to recover. If your Honours jump forward to page 191 of the report, in the first paragraph, in discussing Fuller’s article, Justice Learned Hand indicates that the case before him is a case of:

“essential reliance,” –

and he says:

It is one instance –

of the formula and then the formula is set out. So, it is critical to L. Albert & Son that the case was essential reliance, as indeed was Amann, as is not the present case. In that context, if you return to page 189, paragraph [13‑15], first the normal measure of damages is identified ‑ ‑ ‑

BEECH‑JONES J: What page is that again, Mr Gleeson?

MR GLEESON: Page 189 of the report.

BEECH‑JONES J: Thank you.

MR GLEESON: The normal measure of damage is identified, which is consistent with Robinson v Harman. But at the foot of that first column there is the discussion of the possibility of allowing proof on an alternative measure of damages. We have the statement about the promisor in default should not be made the insurer of the other’s venture:

yet it does not follow that the breach should not throw upon him the duty of showing that the value of the performance would in fact have been less than the promisee’s outlay. It is often very hard to . . . value . . . performance –

Now, that is the rule or the principle stated by Judge Learned Hand. It is wholly stated in the context of essential reliance. There is no discussion as to whether this applies beyond that to a case of incidental reliance like our case.

EDELMAN J: Well, another way of looking at the discussion is to say that it starts at [13-15] with what is, I think, on any view, a statement of damages for loss following a breach of contract for the sale of goods, in absolutely conventional terms – and still in conventional terms – then goes on to say there is an exception to that, where one party:

has put the peril of the answer upon that party who by his wrong has made the issue relevant to the rights of the other.

In terms that seem to be very familiar in English law in Armory v Delamirie, and in Australian law. And then, at the end of the judgment, seeks to find another justification for that principle, which is then found in Professor Fuller and Mr Perdue’s article. In other words, the reasoning is not necessarily dependent upon the adoption of the Fuller and Perdue analysis.

MR GLEESON: I accept that, your Honour. We are saying this is not a wholesale adoption of Fuller and Perdue, and, in particular, whether one is extending this presumption into these more incidental, consequential areas of reliance is never addressed by Judge Learned Hand. The principle that he is identifying is in fact a narrower one than Fuller and Perdue, and it needs to be treated with that degree of caution. What is not pellucidly clear from the judgment is, is this a presumption of law, as this Court discussed in Masson v Parsons, or is this an evidentiary shifting of the onus?

Now, if it is a presumption of law as per Masson v Parsons – if facts A, B, and C are proved, the Court must conclude D, absent proof to the contrary on the relevant standard. When Justice Gaudron read this paragraph in Amann, at page 152, she said this is not a presumption of law. She said nothing that Justice Learned Hand proposed here was anything more than a shifting of the evidentiary onus.

Now, if that be the correct way to read it, then it is closer to the principle that we urge on the Court for Australia. If this is to be read as a shifting of a legal burden of proof, then we suggest it is not and should not be the law of Australia.

GAGELER CJ: Mr Gleeson, the Court might, at this stage, take its morning adjournment a little earlier than normal.

MR GLEESON: May it please the Court.

GAGELER CJ: We will take a 15-minute adjournment now.

AT 10.53 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.05 AM:

MR GLEESON: Your Honours, in volume 5, at page 1433, which is tab 45, the second Restatement took up the urgings of Fuller and Perdue and stated a far broader principle than the first Restatement, and once which, we submit, does not reflect Australian law. Firstly, because what is now described as an “alternative”, which is a right to damages based on the reliance interest, everything that follows has, as its premise, that one is protecting a separate reliance interest – which is the tort interest – as a matter of right.

At paragraph 344 of the secondary statement – which is not in the materials – Fuller and Perdue’s recommendation was expressly taken up by the reporter, recognising expectation, reliance, and restitution interests as all protected by contract. Secondly, you see from the “including” that what was the outer boundaries of the earlier Restatement is now treated as but an illustration. Thirdly, the onus cast on the defendant is an onus on the reasonable certainty standard, which is higher than the standard of Australian law.

Comment a makes very clear what is intended by this broader statement of the law, including – in the illustrations, 1, 2, and 3 are essential reliance, but paragraph 4 is our case, where an onus is apparently cast on the defendant – apparently, a legal onus – to prove what would have occurred under the contracts collateral to the contact that has been breached. The footnote for 4, the illustration over the page is said to be Nurse v Barns and L. Albert & Son, which, of course, did not go that far.

So, your Honours, I think paragraphs 4 and 5 of our outline of submissions we have addressed. Could I come to Amann Aviation [1991] HCA 54; 174 CLR 64, which is paragraph 6. It is volume 1, tab 5, page 79. Using the Commonwealth Law Report reference, at 74, foot of the page, a critical factual premise for Chief Justice Mason’s judgment and a number of the judgments was that Amann’s prospects of recovering the expenditure rested in part on receipts under the first contract, but in important part on whether a valuable renewal could be obtained, and the finding of fact was that there would be a strong prospect of renewal, and one might infer that renewal under a favourable contract, because Amann:

would be fully equipped with the cost of its aircraft written down.

Next, at 80, under the heading “The award of damages” we have the general statement of Robinson v Harman that we agree with. Immediately over at page 81 the Court is addressing a particular type of contract, not every contract, and it is the contract I have been speaking about this morning where it is essential reliance plus the expectations of recoupment of expenses incurred in discharge of contractual obligations from the counterparty.

GORDON J: Where do I find that, please?

MR GLEESON: Top paragraph, page 81.

BEECH-JONES J: So, you would distinguish that from the example given by the Chief Justice, because the department is not doing that?

MR GLEESON: Yes. I accept your Honour Justice Edelman’s point that this may not be the only rationale for an evidentiary shifting of the burden, but, at least in this judgment, an important rationale is an assumption about what happens in the ordinary course of commercial dealings of a particular character. Of course, that is the type of case it was dealing with and one will not find any discussion in here of whether such assumptions would ordinarily be made in a different case like our case. You will see repeated twice in the next paragraph, at about halfway down ‑ ‑ ‑

GLEESON J: Why would you not make those kinds of assumptions in the case of a contract like this?

MR GLEESON: Like ours?

GLEESON J: Yes.

MR GLEESON: Because it is wholly dependent upon what decisions are made in the pursuit of ventures which are extraneous to the contract between these two parties and those decisions are going to depend upon, firstly, the business skill of the respondent in conducting those businesses. We know that did not go so well. It is going to depend, secondly, upon whether other people choose to take up lots in the airport, assuming they become available – so, that is wholly dependent upon third‑party decisions. Thirdly, whether those other people are successful in their businesses and whether that creates any flow‑over benefit to the respondent’s business.

Fourthly, given the respondent’s businesses had effectively failed at the date of the breach, whether or how the respondent could finance the period of time necessary to try and hang on to start making some money from these unknown other businesses – so, they are all the sorts of things which raise imponderables inherent not in the breach but inherent in the very nature of the expenditure and its incidental relationship to the contract in question.

GLEESON J: I see. Thank you.

EDELMAN J: Why should one party’s expectation in a commercial contract have any bearing on whether or not an evidential onus shifts or not? I mean, almost every party to a commercial contract will expect to make a profit, and every counterparty will be hoping that they make a loss.

MR GLEESON: Well, your Honour, that is the point by Justice Toohey, Justice Gaudron and Justice McHugh very, very powerfully. Justice McHugh, albeit in dissent, with respect, nailed this point. In fact, one of the problems with Amann and getting a ratio is, do your Honours look for the judges who joined in the orders, or do you look for four judges?

GORDON J: Welcome to our world.

MR GLEESON: I was enjoying the challenge of posing the question and not having an answer, your Honours. If one takes the Judges joining the orders, we have Chief Justice Mason, Justice Dawson, Justice Brennan and Justice Gaudron, critically. If we treat – if you try and get four Judges for a principle, which is what the Court of Appeal did, you drop Justice Gaudron – she is in the reserve Bench – you pick up Justice Deane, even though he dissented in the orders, and you try and meld that together.

Now, your Honour Justice Edelman’s question was, why should this be given any weight or any strong weight in the raising of an evidentiary presumption? What I was seeking to say was, you have Justices Gaudron, Toohey, McHugh, who follow the sentiment of your Honour’s question. You have Justice Brennan, who does not rest it on this ground, he rests it on his view of breach causing impossibility on the ordinary measure. So, you really only have three Judges: Chief Justice Mason, Justice Dawson, and Justice Deane, who give weight to this proposition.

Now, what that means is, you are not bound as a matter of ratio to treat this as law, subject to you reopening it. It is an idea which, if your Honours are to give it any further life, we would submit, has to be looked at along with whatever other inferences are appropriate to draw in the case. But I do want to emphasise, that is not the only lynchpin, but that is a critical lynchpin of Chief Justice Mason’s judgment, and twice in the next paragraph they repeat the idea that they are focusing on:

damages of expenditure justifiably incurred for the purpose of discharging contractual obligations –

That is halfway down. Further down:

recovering costs incurred in the course of performing contractual obligations –

So, it is an incredibly carefully‑written judgment in the light of Fuller and Perdue, which we know from the next page, page 82. And their Honours have chosen, on 82, to extract from Chief Judge Learned Hand the first sentence – this is at point 5 – which is in the context of essential reliance, which was that case and Amann, then to make no comment on the further discussion about the problems of incidental reliance ‑ ‑ ‑

GAGELER CJ: What is the distinction between those two?

MR GLEESON: Essential reliance is moneys that I spend in order to perform, or to prepare myself to perform, the obligations I owe under the contract. So, that is one aspect of it. But related to that, very, very closely, is that, usually – perhaps always, but at least usually – the expectation is that I will recover my expenditure out of the things that are coming to me from the counterparty, so my recoupment is from, usually, the contractual price under the contract.

Now, that is the context in which Chief Justice Mason identified what he called “ordinary commercial expectations”. And so, we are – our case is multiple steps removed from that, because there is a permission to build a hangar. There is no duty to build a hangar, it is completely up to them whether they build a hangar or what sort of hangar they build. They choose to build a non-demountable Rolls Royce hangar. Whether they had any expectation of recovering that cost did not depend upon performance of the lease; it depended upon their separate businesses.

So, your Honours will see on 82, it is a careful selection of part of Chief Justice Learned Hand but not any adoption of incidental reliance. Then there is a reference to the Restatement that I have taken you to, and Chief Justice Mason is at pains, over on page 83, to indicate one reason why that does not reflect Australian law, which is the reasonable certainty standard, but a further reason he points out on page 85 at the top, which is that the ‑ ‑ ‑

STEWARD J: They point out.

MR GLEESON: They point out – yes, I am sorry, your Honour – that:

the language of election or the notion that alternative ways are open to a plaintiff –

is not consistent with Robinson v Harman. So, at that point – your Honour the Chief Justice asked me about English law. This is where the earlier English authorities are regarded as inconsistent with Australian law, as is the United States approach. Everything is rationalised under Robinson v Harman.

Professor Treitel, perhaps unkindly, described this as the verbal trick, because what has happened is reliance damages that have come out of a United States approach have been refashioned into Robinson v Harman. We do not make that criticism. We accept this as the way Australia has dealt with this difficult creature. But the result is Robinson v Harman ‑ ‑ ‑

GAGELER CJ: So, Professor Treitel states the law in England at the time he was writing, pretty much in terms of the first Restatement, leaving aside the price. So, you have a consistent approach in the United States and United Kingdom, it would seem, and you are saying Australian law is out of step with that?

MR GLEESON: No. What I have said is, if your Honour is focusing on the United States approach in 1932 and Professor Treitel’s statement in England, there is, firstly, the limitation in that one is grappling with essential reliance, they are not exploring these problems of collateral reliance. That is one aspect that is clear of that. Secondly, whether it is a legal onus shifting or an evidential onus is, with respect, not pellucidly clear in either the United States or the United Kingdom. Now, if they are to be treated as instances of evidential onus shifting, then we do not have a great deal of difficulty with that as the then‑law. If it is a rule of law, presumption of law, then we say that was not Australian law.

Then, at 86, point 5, turn to the question of, why do we raise any form of presumption? There is an extract from Chief Judge Learned Hand on page 87, then the answer seems to be given at the foot of 87. At this point, their Honours seem to be focusing on the commercial expectations assumption:

The placing of the onus of proof on a defendant . . . amounts to the erection of a presumption that a party would not enter into a contract in which its costs were not recoverable.

Then, your Honours, there is an incredibly important passage at the top of ‑ ‑ ‑

BEECH‑JONES J: Do you say it is a reference to “costs were not recoverable” under the contract?

MR GLEESON: Under the contract. At the top of page 88 ‑ ‑ ‑

EDELMAN J: And you say that the reference to “costs” there is only a reference to essential reliance costs, not into incidental reliance costs?

MR GLEESON: They have not addressed incidental reliance cost. And that is the step Justice Brereton has taken. He may be right or wrong, but it is not a step that this judgment, with respect, has taken. Because it did not need to, it did not address it.

EDELMAN J: But why would it not, on their rationale, it necessarily extend to incidental reliance losses? Because their rationale is that people do not enter into commercial contracts unless they expect to recover all of their costs. The expectation of recovery would not just be the costs that they incur for the performance of their obligations, it would include all their incidental costs.

MR GLEESON: Your Honours, we are not embracing the commercial expectations hypothesis. We are saying, if it has any work to do, it can be put into the evidentiary mix, but have a look at the sort of contract you are dealing with. And when their Honours stated it – I am at pains to point out they stated it in a particular context – they did not say every contract has this character – and that is why I come to page 88. The top of page 88 is absolutely critical, and, with respect, Justice Brereton has ignored it. They immediately start to say there are some types of contracts where:

it would not be appropriate to apply the presumption . . . for the reason that inherent in the entry into such a contract is the contingency that not even the slightest expenditure will be recovered, let alone the securing of any net profit.

Now, your Honour Justice Gordon asked me why does the contract matter, or to get that submission down into a concrete aspect. What their Honours here are saying is, you have to look at the particular contract to see whether, given its uncertainties, it would simply be incoherent or unreasonable or unfair or unjust to raise the presumption.

We agree. That is the sort of inquiry that is needed. But what is interesting is that what their Honours call “purely aleatory” contracts are broader than that description as it is normally understood.

GORDON J: Why?

MR GLEESON: At its narrowest, an aleatory contract is, for example, a wagering contract where parties promise ‑ ‑ ‑

GORDON J: You cannot – there is a bet.

MR GLEESON: It is a bet, and one party in fact does not want the event to happen, but pays money if it does happen. Now, the case they cite – Aldwell v Bundey – is not a purely aleatory contract in traditional concepts. That is the case – it is in the materials – where there was a boat race being conducted and the promise was, you will be permitted to row and if you win, you will get a price.

Now, in that case, reliance damages were recovered and their Honours say that is a purely aleatory contract. Indeed, they say at the foot of 88, it should now be understood not as reliance damages but as a Chaplin v Hicks loss of the chance of winning the race. So, their Honours are saying, in Aldwell v Bundey you should not apply any presumption because, obviously enough, there can be no certainty whether you are going to win the boat race.

STEWARD J: Mr Gleeson, is the effect of your submission that you would never get reliance damages for breach of a lease where you cannot recoup – you do not recoup your expenditure from the landlord, who only provides you with a possession? That would mean all – you would never get it, for any commercial lease.

MR GLEESON: I am hesitating, your Honour, because in practical terms it may lead that far. But in legal ‑ ‑ ‑

BEECH‑JONES J: You would allow direct cost, though, like your solicitor and all that sort of stuff?

MR GLEESON: Yes. You will be able to get that category of costs incurred, for example in negotiating and entering the lease. But, to the extent you say, had the lease been honoured I would have conducted business X, Y and Z from the premises, for practical purposes, which is fair and just, you will be require to pursue your ordinary damages either on loss of a chance basis or on a proof on the probabilities basis. That would be the ordinary practical result.

If you are trying to squeeze them into this, you are going to have difficulty, because you are going to have to say, well, what is the basis upon which I am shifting a legal onus to the lessor or the promisor? If it is commercial expectations, well, it is not going to get you anywhere, for Justice Edelman’s reasons. If it is fairness and justice, that is not going to take you terribly far with an evidentiary onus because, first of all, where does all the evidence lie as to what business you would have conducted, would it have been successful, how would you have financed that? It all rests with the innocent party.

STEWARD J: I understand.

MR GLEESON: So, I am not completely ruling it out, but I am accepting the force of your Honour’s question that ‑ ‑ ‑

STEWARD J: Can I ask you another question. How do all these principles fit into a situation we have here, where we have a Council owning an airport which invites tenders from people to come and develop parts of the airport and a tender is accepted? In other words, this is not a purely commercial area. This is partly governmental, partly commercial. How do these principles fit into that context? You might say they just do not fit in at all.

MR GLEESON: They can be accommodated, but they do require adaption into those circumstances. So, the way we would see it, your Honours, if this had been approached on a conventional damages basis, what would have happened? You would have said the promise was to take reasonable steps to register the lease which, on the facts, would probably have led to the plan being registered. That would have been step 1. Step 2 is, if the plan was registered, there would have been a 30‑year lease which had burdens for 30 years.

JAGOT J: And the sewerage system that the Council had paid for, enabling development of the other lots, by definition.

MR GLEESON: Of the other lots. Yes, I accept that, your Honour.

JAGOT J: Yes.

MR GLEESON: So, you would have had the burdens of the lease, you would have had the benefit of the right to use the land and, yes, the land would have had that surrounding amenity improved. So, step 3 is, there was no promise by the Council to spend any money on developing the lots other than what was necessary to get the plan registered.

Step 4 is whether your business had any chance of success, which was wholly dependent upon how you, the respondent, grappled with the difficulties you were facing, which were enormous. Step 5 is, if your case was that if other people took up the lots the overall area might be a happier place to go to, that rested on a whole lot of probabilities. So, what a plaintiff could do in that circumstance was they could, firstly, seek to prove on the balance of probabilities they would have recovered the $3.7 million.

Alternatively, they could seek to prove on the balance of probabilities that the chance of recovery of some of it was a valuable chance, which could then be assessed on the possibilities and the probabilities under Malec v Hutton. Where the grave difficulty arises, as per your Honour Justice Steward’s question, is, can you simply set up and say: I spent the 3.7, over to you to prove that every one of these uncertainties over the 30 years would not have led to recoupment.

So, your Honours, I was on page 88 of Amann to indicated that, according to two Justices, Aldwell v Bundey should not have been done as a reliance damages case; should have been done as a loss of a chance case, and it tends to give pause to the question, can the respondent here use this shifting of the burden to avoid the need to prove that there was at least a valuable chance of recovering some or all of the expenditure.

Page 89 at point 4 we submit is correct in saying that McRae does not depend upon any presumption. So, it treats the presumption as something different to McRae. The last sentence of the middle paragraph is what I said in answer to your Honour Justice Edelman, there is some reflection of a broader principle, just and fairness, but that seems to be referable to the circumstances of the case, not a general rule. It is then said that:

it was not impossible, as a matter of theory –

to prove the profits. That is, we submit, correct. Justice Brennan took the opposite view, we submit, incorrectly. But importantly, at the foot of 89, over to 90, we find out why the presumption was applied in the particular case. And the reason it is applied is that:

The prospect of renewal was –

regarded as:

an important commercial benefit which would then have accrued –

from performance of the contract. And within the contractual framework:

Amann was looking to that commercial benefit as well as revenue receipts arising under the original contract as the reward which it would obtain under that contract.

Now, coming back to your Honour Justice Edelman’s question, this appears to be tighter than merely a generalised assumption that people enter contracts hoping to make profits or get back their expenditure. It appears to be an analysis of the particular contract, and the reasonable expectations of both parties that it would be the prospect of renewal which provides the second source to recoup the expenditure. Now, that is the type of tailoring of the enquiry to the contract that we urge is necessary. And they conclude the paragraph:

On this score alone it was a case in which, it being natural and appropriate for Amann to sue to recover its wasted expenditure –

not it is always appropriate but having regard to the reasonable objective expectations of the parties under the particular contract.

GORDON J: If we just step back from this contract and apply that to the facts of this case, one has a contract where, you say, they have permission to build a hangar. Why is it not that part of the – even if you adopt this specific analysis to the facts here – one where it was an important commercial benefit that they would have by registration of the subdivision in order to proceed?

MR GLEESON: Whether that benefit had any real prospect of allowing recoupment, or if so, what prospect, was dependent upon the series of events that I summarised in answer to your Honour Justice Jagot, which are collateral to, extraneous to the contract that has been breached.

GORDON J: I do not know about that. At the top of 90 there are two steps, I think. The first is the prospect of identifying the thing which was of “important commercial benefit”, and then the next sentence says:

Amann was looking to that commercial benefit as well as revenue receipts arising under the original contract as the reward which it would obtain under that contract.

In other words, there was an identification, even on your analysis, of the thing; here, ours was the subdivision, which was the critical step that needed to be taken before any of this could proceed. Then there is the next question: having got the thing which enabled you to launch the commercial enterprises, you then might have looked forward to revenue prospects.

MR GLEESON: Your Honour, I beg to differ. The thing, the difference, is that Amann is being analysed as a case where I spend the money on the planes, I reasonably hope to get some of it back under the first contract under the revenues, I reasonably hope that I will get a renewal which, if I get, is very likely to be of positive value because of my finances at that point, and I will recoup the balance of it from the defendant out of that prospect of renewal.

So, if one thinks of it in terms of mutuality – the mutuality which is implicit in this paragraph is looking at the reasonable expectations of expenditure and recoupment between the parties. Nothing in this is saying, what are the expectations of recoupment from third parties. Who are the third parties? The recoupment is going to come, if at all, from people who choose to accept the custom of the respondent.

EDELMAN J: The problem is, there does not seem to be any analysis of the value of any renewed contract. In other words, it seems to have been assumed that the renewed contract is something that the respondents would expect to be something that would be of substantial value to them to allow them to recoup their expenditure.

MR GLEESON: Your Honour, I accept that in this judgment of these two Justices, that step – which is whether, if you got a renewal, it would definitely have positive value – is not explicitly teased out.

GORDON J: But it is addressed back on 89, is it not? In effect, what they say is, it is just too difficult to work that all out. It is specifically described as undertaking that exercise “were legion”, add to those the uncertainties that the fact of the income:

flowing from the Commonwealth’s breach . . . was represented by the wasted expenditure.

MR GLEESON: I took your Honours to the bottom of page 74. It is not completely made explicit there, but what seems to be implicit is, at the end of the first contract you will have a good chance of getting a renewal, and, because you will have the planes written down, you have a good prospect of making a substantial profit under that second contract. Now, I agree with your Honour Justice Edelman, it would have been better – and this is part of our case, that if one is going to treat this commercial benefit as something relevant to recoupment, it would be better to make an explicit finding that the chance had positive value.

GLEESON J: Is that not what an “important commercial benefit” means?

MR GLEESON: If that is what their Honours mean, then I am not being critical with it. But the premise seems to be, the chance is a real chance, and, because it is a benefit, the renewal is going to be profitable for you, as best you can tell, because you are starting with a lower cost base than your competitors.

Now, coming back to your Honour Justice Gordon, if that is what the premise is of this reasoning, the critical difference in the present case is there is no finding, and there could be no finding, that the chances of the other businesses producing sufficient revenue to recover expenditure were any better than the chances of those other businesses causing more losses. So, the thing – namely, the opportunity to conduct businesses from the leased premises – on our facts, would not pass ordinary principles of loss of a chance because if you are trying to value it, either at the outset or at the breach, you would have to say there is at least as much chance, if not more, that you will suffer further losses, rather than recoup expenditure.

EDELMAN J: Unless, in the proof of loss of a chance cases, you can have the benefit in establishing the thing or the asset at the first stage of the proof of a reversal of onus or a so‑called presumption. There are cases that suggest that, at that stage, an applicant might get the benefit of that boost.

MR GLEESON: If cases say that – in particular, English ones – we say that is not Australian law, and that illustrates the whole problem of it, because if that is what is happening, namely you simply point to a prospect, there is a prospect that the businesses might have gone well and allowed some recoupment – I do not have to make any finding as to whether that was more probable than the alternative prospect that you would have suffered greater losses – then it is hard to see what basis this principle is resting on.

EDELMAN J: Well, the answer would be that it is resting on the basis that whereby the wrongdoer’s breach of contract they have made the difficulty of proof of the loss of chance, or the difficulty of proof of the value of the asset, something that is very difficult for an applicant or a plaintiff to prove, then that is the reason why it would shift to them. That is one of the explanations.

MR GLEESON: But if that is the explanation, your Honour, we do not apply that in the law when the plaintiff runs the case through loss of the chance – at least, not in Australian law. In the case of loss of a chance, this Court has made tolerably clear – Badenach v Calvert, and other cases – the onus is on the plaintiff to prove, on the balance of probabilities, they lost something of real value. There is no shifting of presumption at that stage.

EDELMAN J: Has there been a loss of a chance case where a plaintiff has said to a defendant, because of your breach it has made it very difficult, if not impossible, for me to prove the existence of the asset, or the value of the asset for which the loss of a chance claim rests?

MR GLEESON: I am not aware of that case, your Honour, but I took you to Berry at paragraph 29, which is volume 1, tab 4, and we would submit that three Justices of the Court have made clear that the extent to which the Court gives the innocent party the fair wind – to use that expression – is limited to saying, you still need to prove, on the balance of probabilities, that you lost a real chance.

Your Honours, concluding this judgment at page 92, in the middle paragraph – and this may relate to your Honour Justice Gordon’s question – the judgment says:

The prospect of renewal was a distinct commercial benefit, inevitably contemplated by the parties as enuring to the advantage of Amann on, and by reason of, its performance of the contract.

It is by reason of Amann, doing the things it was to do under the contract, that the prospect of renewal was brought into the frame. We would submit the next sentence is important:

It was not an advantage which would accrue to Amann independently of performance of the contract or incidentally.

So, our submission at its shortest is that, on our facts, the advantages said to arise from conducting a profitable business arose independently of performance of the contract, because all the contract required was pay your rent, or they arose incidentally. Now, page 94 explains the application of those facts. Your Honours, there is a problem with the concluding sentences at the top of page 98, which is why was there no discount for the 20 per cent chance of the Commonwealth terminating the contract. We are told there is no need to discount for events unlikely to occur, but without any clear reason why, and that is a matter Justice Deane dissented on, but it illustrates the uncertainty of the principles in this case.

Secondly, Justice Brennan, at page 100 – the situation that he sets up leading to his mathematical formula is the same example as Chief Justice Mason and Justice Dawson at page 81, which is expenditure in performing or preparing to perform the contract with the expectation of recoupment from the counterparty. His Honour does not discuss the broader problems of incidental reliance. At 102, in the first full paragraph, it is important to note his Honour took a road which no other Justice took in the case, and Justice McHugh expressly said was wrong. Namely, his Honour said you could look at the prospect of renewal only if you could imply a promise to give the innocent party the benefit of that prospect.

Without that implied term, which his Honour then found on the facts at pages 111 to 112, his Honour would not have awarded reliance damages. For that reason, it is impossible to get a majority of four Justices for the propositions of Justice Brereton. Then, in terms of principle, at the top of page 105 his Honour refers to an evidentiary onus:

on an inference that a party would not incur expenditure in reliance on the other party’s promise without a reasonable expectation that, on performance of the contract –

not performance of collateral contracts:

the expenditure would be recouped . . . of varying strength according to the circumstances.

Your Honour Justice Beech‑Jones’ question about varying strength of the presumption, we have no difficulty with. At the top of page 105, that may or may not arise, may or may not be strong or weak. What his Honour’s judgment then stands for is the top of 106 that:

The sufficient and necessary justification for shifting the onus . . . is that the breach of the contract itself –

I emphasise “itself”:

makes it impossible –

let it be interpolated: or difficult, very difficult:

to undertake an assessment on the ordinary basis.

So, one is looking at the breach itself creating that difficulty and, absent that, his Honour says you cannot recover reliance damages. As to what his Honour meant by that, if you go to 112 to 113, what his Honour thought, and no other Justice thought this ‑ ‑ ‑

GORDON J: Sorry, what page is that, Mr Gleeson?

MR GLEESON: Page 112, point 6.

GORDON J: Thank you.

MR GLEESON: His Honour thought, alone, that because the thing you are valuing was the chance of a renewal you could not carry out any valuation unless you took into account three years further performance of the contract, which the breach, by definition, prevented. So, compare that with Chief Justice Mason and Justice Dawson at page 89: there was no impossibility of establishing the damages.

It was because of that particular view of Justice Brennan that you could not do the valuation until three years down the track; that he was prepared to award reliance damages. Can I interpolate there Justice Brereton in his alternative reasons attempts to map our case onto Justice Brennan. The fundamental difference is that, in our case, the thing that was being valued was the promise in September 2011 to take steps that would have led to a lease. A lease is capable of valuing as a creature in September 2011. It was equally difficult or not difficult to value that lease before or after the breach. Justice Brennan’s concern was not attracted on our facts. We embrace the point made by Professor Lücke in volume 5 ‑ ‑ ‑

EDELMAN J: But why could not the same be said of the factual circumstances in Amann itself? One could say you could get expert evidence to value the three years of expected performance as if they had occurred.

MR GLEESON: That is what we say is correct, and that is why Professor Lücke, in volume 5 – it commences at 1257, but the discussion is around pages 1279 to 1280, which is that Justice Brennan was not correct in this outlier view that he took. You could value it, it might be difficult, but the thing you are valuing is the promise to grant a lease in September 2011.

EDELMAN J: That is not to say, then, that Justice Brereton made any error in attempting to map Justice Brennan’s reasoning onto the facts of this case. It is to say that the error lies in the premise of Justice Brennan’s reason.

MR GLEESON: It certainly lies in the premise of the reason, but the additional error I am pointing out is what Justice Brereton seems to have mapped onto this is if your promise had been performed, I would have got thirty years of a lease. By definition, I cannot find out how a 30‑year lease would have played out until year 30. QED, according to Justice Brereton, the breach has prevented the valuation, but once one accepts that what you are valuing is the promise to grant a lease on a given date in 2011 none of those matters are a difficulty, you simply take into account the possibilities and the probabilities of revenue and expense under the lease.

GLEESON J: Mr Gleeson, is the argument that you are putting today in support of the proposition in your written submissions about two forms of the presumption?

MR GLEESON: Yes, your Honour. In our written submissions, the first form – which is paragraph 35 in-chief – is the casting of an onus, evidentiary only, in a particular case of a McRae problem. We submit Chief Justice Mason and Justice Dawson are correct that the McRae problem did not arise in Amann, and it does not arise in our case, and Justice Brennan was in error to think there was a McRae problem on the facts of that case, or the present case. So, that is one target.

The second target is paragraph 36, to which we have to accept that the so‑called justification is either ordinary expectations or Armory v Delamirie, but we say even in that context, as per 37, at most there will be a shifting of an evidentiary onus. Whether there is a shifting is going to depend on the case. As per paragraphs 39 and 40, we provide some suggested guides on the limited scope for the second presumption, particularly in a case like ours.

Your Honours, just to conclude Amann, if I then could go to Justice Gaudron, the fourth judge in the orders. Her Honour, at 154, point 2, considered the possibility of approaching the damages with regard to wasted expenditure, but at the foot of 155 to 156 – sorry, that is 154, point 2 – made very clear this is only a practical or an evidentiary onus, consistent with L. Albert and McRae. We would embrace what is at the foot of 156 as good law that:

An assumption is no more than . . . “a starting‑point”.

No formal burden of proof imposed on the defendant. Then, critically, her Honour recognises, at 157, point 4, that plant and equipment will raise particular questions. In terms of application, at the foot of 157, the reason her Honour joined in the orders was she made a finding of fact on the balance of probabilities that the plaintiff had established that the likely value of the planes at the end of the first period would be greater than the expenditure. Her Honour says, at the foot of that page, the relevant assumption:

was consistent with the evidence when proper account is taken of the value –

That is how we submit these things should be done. Firstly, it is evidentiary only; secondly, it is tailored to the particular case, whether it has any force and what strength; and thirdly, one then takes into account all of the evidence to see what findings can be made, bearing in mind the plaintiff’s legal onus.

The result is, your Honours do not have a majority in those four Justices for Justice Brereton’s paragraph 73, and, in fact, you have statements in all of them, in differing terms, requiring much more qualification and nuance than paragraph 73. If you go to the other three Justices, Justice Deane, at page 126 at “Reliance damages”, his Honour first states the principle using language of “impossible or difficult to establish”, and refers to considerations of justice – footnote McRae and L. Albert & Son – but then his Honour’s rational basis appears to be an evidentiary one.

JAGOT J: Sorry, what page are you on now?

MR GLEESON: Page 126, point 5.

JAGOT J: Thanks.

MR GLEESON:

In my view, the rational basis of that presumption is that that total detriment represents what would reasonably have been in the contemplation of the parties themselves as the cost to the plaintiff of full performance by the defendant and constitutes some evidence, in proceedings between them, of the value of the total benefits which would have been derived by the plaintiff from such performance.

Now, coming back to your Honour Justice Gordon’s questions, what we see here, we submit, is, firstly, we are looking at evidence. We are not looking at legal onus or presumptions of law, but we are looking at the reasonable expectations of these parties of the benefits that would have been derived from performance, and, importantly, if your Honours see at the foot of that page, Justice Deane is speaking about recoupment of:

past net expenditure reasonably incurred in procuring or performing –

the contract, so it is essential reliance. His Honour has said not a word about extending this evidentiary presumption beyond reliance. Now, Justice Brereton relies, on page 127, about point 4, about chances that more remote benefits do not destroy the principle. The footnotes are interesting; footnote 40 is McRae and Fink. That is as far as that proposition goes, and at 128, point 2, his Honour says that his statements should not be read too pragmatically:

They have been framed with the circumstances of the present case in mind –

So, we would submit, from Justice Deane, you do not have a presumption of law or a strict shifting of the onus. Justice Toohey I will not read; I will simply refer your Honours to the critical passages at page 142, which is, it is merely “an evidentiary onus”, and his Honour gives good reason why. What he puts at the foot of page 142, we would commend as good law.

GORDON J: Which bit is that, please?

MR GLEESON: At the foot of page 142:

There is, in effect, an evidentiary onus on the defendant to show that receipts would not have equalled outlay by the plaintiff, though ultimately the aim is to determine what loss has occurred on the basis of all available evidence. It may be assumed, in the absence of evidence to the contrary, that the plaintiff would have recovered his costs . . . there is no strict onus of proof –

And, finally, Justice McHugh ‑ ‑ ‑

GORDON J: Sorry, do you accept what he then goes on to say as the two rationales?

MR GLEESON: They are the two possible rationales.

GORDON J: Thank you.

MR GLEESON: The first is going to be fact‑specific as to how much force it has, if any. The second, which is the policy justification, is going to depend very much on the effect which the breach has on the problems of proof.

Returning to your Honour Justice Edelman and Justice Gleeson’s questions on Amory v Delamirie, given that was in conversion, if the effect of the breach was to prevent the thing being valued then I would qualify my earlier answer and say it is not really just a prospect in that type of case. The effect of the breach may run readily to the conclusion that the plaintiff must succeed, because considerations of justice are paramount in that type of case.

So, where does that leave the Court in respect to Amann? Our summary submissions are in paragraphs 6 and 7 of the outline. In particular, as per paragraph 7, we say there is no majority for the proposition that the presumption arises for all contracts or for all forms of expenditure relating to contracts. In fact, there is a majority to the opposite of that.

There is no majority that the presumption is one of fact, not law. If anything, there are at least three judges in favour of an evidence‑based presumption, Justice Brennan taking a different approach, Justice Deane being evidence‑based, so that is four – leaving Chief Justice Mason and Justice Dawson – depending on how you read them.

GLEESON J: But is the Amann principle in that paragraph the second form of the presumption?

MR GLEESON: Yes. Yes, I am sorry, your Honour, yes. The presumption being based on usual expectations of commerce – I would add, or justice and fairness, so far as relevant – whether the presumption arises and, if so, with what strength, is going to be wholly dependent on the particular contract, the allocation of risk under it, nature and degree of expenditure, essential or incidental to the contract, expected source of recoupment from the contract or otherwise, the degree of speculation inherent in the contract or expenditure, and the actual conditions referable to the contract leading up to breach.

Your Honours, as per our paragraph 8; your Honour Justice Edelman asked about our literal picking up of the word “prospect” in paragraph 29 of Berry. It may be that that paragraph is a compendious statement of much deeper philosophical problems. We would say that, at least in our type of case, where the chance of their being any recoupment of the expenditure lay wholly in the area of whether the opportunity generated by the lease proved to be profitable or, conversely, deleterious – then, in that case at least, if there was any shifting of the onus, which we deny, the most we had to do was to show a prospect of non‑recoupment.

Your Honours, can I turn to the facts. First, if your Honours have the agreement for lease, which is at appellant’s book of further materials page 4. Page 14, clause 3.1(a) is the basic promise. Clause 3.1(b) incorporated the terms of the lease. Over the page, 4.2(a) is the clause that was breached. Performance was required by the sunset date, which was September 2011.

We first observe there is no promise in the AFL that the appellant will spend any money or do anything to develop the 25 lots, save for the matter I have accepted from your Honour Justice Jagot, which is do whatever is involved in registering the plan. Beyond that, there is no promise.

Next, on page 25, the releases in clause 12.3(d), (e) and (f)(4)(B) and (C) are tolerably comprehensive in indicating that, as between these parties, whatever is done by the respondent to seek to conduct its businesses on the land will not be, in any way, the contractual business of the appellant. Clause 12.4 indicates that the occupation and the carrying out of work is at their own risk. A clause which impressed her Honour was clause 16.8 of the lease itself, which is on page 82. The agreement was that, at the end of the lease, any improvements would be transferred to the lessor for $1.

Part of the bargain from the outset was that the respondent could not take away the hangar. So, if it chose to erect a non‑demountable hangar ‑ ‑ ‑

GAGELER CJ: Mr Gleeson, I am not sure it is 16.8. I think it might be another clause.

MR GLEESON: It is page 82 of the attached lease, your Honour.

GAGELER CJ: Thank you.

MR GLEESON: Putting all that together, if the respondent chose to erect a non‑demountable Rolls Royce hangar, it was at the risk that if the contract were terminated, it would be paid $1 only. Your Honours will recall that, notwithstanding the breach by the Council and the repudiation, it was not accepted by the respondent, and the contract, in fact, lawfully came to an end at the Council’s instigation in 2015. That is the reason that the hangar was transferred for $1. That is primary judge, 221.

Now, Justice Brereton commenced to entertain a doubt whether that was a correct finding, but ultimately recognised, correctly, that there was no challenge before him to that finding, and it was not open to him to interfere with it. That is Court of Appeal, paragraph 108.

So, they are some of the contractual allocations of risk that are important. The risk of construction of the hangar and the possibility of losses from the respondent’s business relating to it lay with the respondent. The lease required substantial payments of rent. You see them on page 36, which were ultimately carried over to the lease. While there is no obligation to conduct a hangar, there was a permission to do so. You see that on page 101, item 9. The permission was to conduct the hangar for two businesses: joy flights and advanced flight aerobatic training.

Now, the amount spent on the hangar vastly exceeded the $560,000 which had been originally represented to the Council. The performance of the businesses under the AFL was disastrous, as the primary judge found, and that has not been interfered with on appeal.

If your Honours have the appellant’s book of further materials, at page 110. In the first year there was income of $147,000. There were losses of $52,000, rent of $44,000, interest of $88,000 – because of the borrowing from the holding company to build the hangar – and an item for depreciation of $42,000. So, that is the attempt in the first year to claim back some of the expenditure, yet note the alleged depreciation was overtaken by the losses for the year. If they had recovered $42,000 a year, it would take them 88 years to recoup their expenditure.

Now, the balance sheet for 2010 is on page 112 and that reflects the losses for that year. If your Honours could keep that book open but go to the most recently filed supplementary book.

GORDON J: I am sorry; did you say for the year ending 2012?

MR GLEESON: I said that was 2010.

GORDON J: The balance sheet was 2010 – on page 112; is that what you said?

MR GLEESON: Yes.

GORDON J: I see. Thank you.

MR GLEESON: So, the following year is found in the most recent book, at page 56.

STEWARD J: Just before you go on, Mr Gleeson, you said that the loan was an inter‑company loan?

MR GLEESON: Yes.

STEWARD J: Do we know what the actual loan costs were for the consolidated group?

MR GLEESON: I think the answer is, no, your Honour. The most we know is, we have a balance sheet for – can I just try and come back to that, your Honour?

STEWARD J: Just put it on notice, yes.

MR GLEESON: Yes. So, pursuing through the respondent, its 2011 Profit & Loss is on page 56 of the joint supplementary further materials. The income performance is disastrous, there are losses for the year. There is no rent for that year because the rent was all paid through the holding company – apparently as a gift, because it is not accounted for here – and there is no depreciation. On page 57 the balance sheet then reflects a further deterioration over the 2010 year.

GORDON J: What was the third – no rent, no depreciation – what was the third element you just put to us, please?

MR GLEESON: The balance sheet shows an according deterioration over the previous year because of losses. And then 2012 is at page 58, that is the balance sheet – there is a further deterioration because of losses in that year. If your Honours then go back to the appellants’ book of further materials, at page 119, there is the 2011‑2012 P&L. The businesses have performed poorly, there are losses, there is no depreciation, and no interest.

BEECH-JONES J: Mr Gleeson, that lease cost seems a little less than what I had understood was being charged.

MR GLEESON: Yes, that is because they stopped paying.

BEECH-JONES J: So, this was not on an accruals basis, this was on an actual pay basis.

MR GLEESON: Yes, and they stopped paying, and you can see that from the very last page of this volume, page 163, they were in default of the rent as at the date of the repudiation, and your Honours might cross-refer to the primary judge at 93 and, in particular, the payments for 22 December of 9,704.07 were late payments for which they were in default at the date of the breach, and because they stopped paying after that, that is why the 19,000 looks light.

Now, all of that material heavily, and correctly, impressed her Honour as saying: we have a real-time experiment here where you have gone out for three years, and each business you have attempted to conduct has failed; you are not recovering any of this expenditure yet, save for what you make of the first year; you are wholly reliant upon your holding company for meeting your obligations; you are not recording your liabilities to the holding company in your accounts; your accounts themselves are a complete mess – that can be seen again in this appellant’s book of further materials at page 157, at the bottom, line 50, to 158, line 5.

The respondent was attempting to sell the business, unsuccessfully – that is 158, lines 35 to 40. There were no genuine offers to buy the hangar.
At 160, lines 25 to 35, which her Honour relied upon:

If I’d been given my tenure I would probably say I think I can make it work. But council would have had to have developed the airport that was also promised.

Well, it was not promise to develop the airport, save in the sense of creating the lots. In terms of attempts to get finance, page 162, lines 30 to 50. What one makes from that, we would submit, your Honours, is a classic case where the raising of a presumption, first of all, would not meet any expectations of commerce that the Court can take judicial notice of, and secondly, does not raise notions of justice and fairness requiring a legal burden to be placed on the respondent on the balance of probabilities to prove the speculative venture would not have recouped expenditure. That is what we put in paragraph 12 of our outline.

STEWARD J: Mr Gleeson, what is the date or time which you need to demonstrate there would be recoupment? Is it when you enter into the contract, or is it when you expend the money?

GORDON J: Or the time at which you do the assessment?

STEWARD J: Yes, add that.

MR GLEESON: It is actually a fourth. In theory, it is the time that you would have recouped the money, but taking into account all evidence available at the trial, so far as it bears on that question. The reason I say that, your Honour, is there are English cases that have discussed when the interest runs from. In theory, the interest runs from when you say you would have recouped it.

BEECH‑JONES J: So, that is the date when you look to see whether the presumption or inference arises, do you say?

MR GLEESON: I am sorry, I think I am answering different questions. As to when the presumption or inference arises ‑ ‑ ‑

BEECH‑JONES J: When is that assessed from?

MR GLEESON: ‑ ‑ ‑ we say that, primarily, that will be assessed at the date of the contract in the first instance, because that will indicate the allocation of risks and the presumptions that could reasonably be made. But it may be permissible to take into account events up to the breach. That is more debateable. But whether it is rebutted, that takes into account all evidence available at the trial.

So, if any assumption or presumption arose, our submission is the Council either pointed to or adduced evidence – of which I have shown you some of the highlights today – and that evidence was sufficient to indicate there was a very substantial prospect that not a cent would be recovered, and that would be enough – that is paragraph 12 of our outline. To be clear – paragraph 13 of our outline – if we were required to prove on the balance of probabilities the most likely single-point outcome of the AFL if performed – that is, the most likely single-point outcome – we support what her Honour said at paragraph 221, which is the presumption was rebutted in the fullest sense.

The single most likely outcome on all of these facts was the appellant’s breach spared the respondent from suffering further losses in paying rent for 30 years as against failed businesses. Just finally, your Honours, I would emphasise that when you consider how Justice Brereton dealt with this question of rebuttal, the matter that he has never dealt with is, on the evidence – and I have shown you some of the high points – by what means was this respondent going to somehow linger on and keep funding its obligations under the lease in the hope that when the larger airport was developed it might, at some stage, be able to turn itself to profitable businesses.

Your Honour Justice Steward, the limited material on the holding company is in the joint supplementary book of further materials, at page 53, which is a “General Ledger” showing it paying rent. The loan is on the balance sheet of the respondent, at page 57, but there is not much other information about the holding company’s own affairs.

BEECH‑JONES J: Sorry, what page was that? Page 53?

MR GLEESON: Pages 53 and 57 of the supplementary book. There is one final factual detail that, given time, I will reduce to a sentence. Her Honour found that there was “little demand” for hangar homes at the time. That is the finding at primary judge 211. The respondent says that Justice Brereton has interfered with that finding, pointing you to paragraph 134. What you will not find from paragraph 134, or from any of the underlying Council material referred to in the final sentences, is an identification of people, personally or by description, who were planning and wanting to take up other hangar homes.

The most you will find is in 2012 some people wanted to sublease the respondent’s hangar, and you will see some plans for further potential development of the airport. You will never see any concrete plan to carry out the 25‑lot development. If I could just give your Honours two plans of the airport that might assist. In the respondent’s further materials, at page 67, that is volume 1.

GORDON J: Did you say the respondent’s?

MR GLEESON: Respondent’s further materials, page 67, volume 1. The proposed lot 104 is found on the eastern side of the airport with three other proposed lots. The concentration of the plan was on the western side, and even if you look at documents as late as 2020, for example ‑ ‑ ‑

JAGOT J: Sorry, I have missed something. I have lot 104 on the eastern side, is that where you first – and then you said go to the western side to see the 25 lots. Is that you are saying? I just missed what you said, it is my fault.

MR GLEESON: What I said was on the eastern side, you can only see three surrounding lots.

JAGOT J: What, 105 and 107?

MR GLEESON: Yes, and the concentration appears to be on the western side.

JAGOT J: On the other side.

MR GLEESON: And the submission then was that in the respondent’s further materials, at page 262 of volume 2. Even if you look at events 10 years later, the development which never proceeded and never got funding was going to be on the western side of the airport in what is described there as “precinct 3”. That is explained over the course of this document, particularly at page 240. So, on 240, if you look at the letter S, even 10 years later the only thing that was planned for precinct 4, which is where lot 104 is, is:

additional apron/hardstand parking –

and:

Upgrade of terminus –

that is the terminal for future charters. So, they are the matters which the Council pointed to in the evidence to suggest any presumption was rebutted on whatever be the necessary standard.

May it please the Court.

GAGELER CJ: Thank you, Mr Gleeson. Mr Williams.

MR WILLIAMS: It will be necessary to come back to those factual materials, but I will do that at the end. The documentary evidence that is contained in the respondent’s book of further materials – part of which your Honours have been shown – led Justice Brereton, in the Court of Appeal, to overturn a number of the factual findings that were made. I will show your Honour how his Honour ultimately – how each of the grounds of appeal, which included some detailed grounds of appeal in connection with factual findings, in ground 5, were all overturned by his Honour. We will deal with that later in our outline.

The outset, however – could I make this point: this is not a case where the respondent is relying on some newly formulated principle that it itself has derived. Rather, it relies on the principles enunciated in multiple judgments of this Court in Amann, and it is true that there are variations and nuances and differences between the reasoning of the various judgments, but in this case, the respondent’s case fell within all of them. If it becomes an issue about whether it is a legal onus or an evidentiary onus – there was no evidentiary onus that was satisfied by the appellant, and that is because its efforts to do so, such as they were, first, did not involve actually abusing any evidence and, secondly, proceeded upon the wrong counterfactual.

We depart from the appellant in a significant respect, and that is: what is the rationale, or the dominant rationale, that is being expressed in Amann for the existence of the recoupment presumption? We briefly summarised this in our written submissions in paragraph 29, but it is necessary to observe that in all the purple passages, if I may refer to them in that way, of each of the judgments in the Court in Amann, we have references to the overriding principle of justice and fairness. To start with, the Chief Justice and Justice Dawson, at 86, point 2, in the first full paragraph, say this:

It should be observed that, in a case where it is not possible to predict what position a plaintiff would have been in had the contract been fully performed, as was the case in both McRae and Anglia Television, it is not possible as a matter of strict logic to assess damages in accordance with the principle in Robinson v. Harman. But the law considers the just result in such a case is to allow a plaintiff to recover such expenditure as is reasonably incurred in reliance on the defendant’s promise. In this case, the law assumes that a plaintiff would at least have recovered his or her expenditure –

Then, when dealing with the onus of proof, their Honours at 87, point 2, quote from the celebrated passage from Chief Judge Learned Hand in Armstrong Rubber.

GORDON J: Before you get there, do you need to address what follows after the bits you have just read in 86?

MR WILLIAMS: I am not seeking to avoid any of it, and I will seek to do that.

GORDON J: I do not say it is against you.

MR WILLIAMS: No, no.

GORDON J: I just think it has to be read in context.

MR WILLIAMS: I accept what your Honour Justice Gordon is putting to me, and we have set out in greater length in our written submissions what each of the Justices found in Amann. The point of my present submission was to focus on the notions of justice and fairness that underlay, or underpinned, the rationale for the erection of the presumption. So that is ‑ ‑ ‑

GORDON J: I am sorry to have interrupted, I understand.

MR WILLIAMS: That is what I was seeking to address. So, at 87, point 2, is the celebrated quote from Chief Judge Learned Hand. Your Honours will see the reference to “a common expedient, and a just one”. It is halfway down the quote from ‑ ‑ ‑

GAGELER CJ: What is being said to be a recoupment presumption really might be an observation about ordinary commercial dealings that is part of the policy justification for a principle of law that is stated in terms of the final sentence of that quotation from Justice Learned Hand, which might, on one view, be said to be another way of picking up the point made on page 89, about point 4, by reference to McRae, illustrating the proposition.

MR WILLIAMS: Yes.

GAGELER CJ: The proposition can be taken to be a proposition of law.

MR WILLIAMS: It is a proposition of law – I am sorry.

GAGELER CJ: And it can have a justification that includes taking into account these commercial considerations, but it would be very odd to say that you have to find the presumption applicable to the particular case before you apply the rule of law.

MR WILLIAMS: Can I answer that in this way. In a case where – in the traditional case, a plaintiff bears the onus of proving its damages. The erection of the presumption gives rise to a legal presumption that there has been prima facie proof of that matter, and then it is a matter for the defendant – I will use the word “defendant” at the moment – to rebut by showing on the balance of probabilities that that legal proposition, or that proposition of law that has been presumed, is to be rebutted.

That is what all four judges in Amann found. Chief Justice Mason and Justices Dawson, Deane and Brennan, they all identified the onus as being a legal onus. That legal onus arose because, by reason of the presumption, the legal onus was satisfied, leaving it to the defendant to rebut it. And it does not rebut it by saying, well, it might not have happened, or there is some chance it might not have happened. It has to rebut the presumption on the balance of probabilities.

That is a very clear statement of position on behalf of those four Justices that I mentioned. Justice McHugh deals with the matter on a rather different basis. He seems to suggest that it is an irrebuttable presumption that does not involve any questions of onus. But, so far as the four judgments which I have referred to are concerned, they are unanimous on that point, that it is a proposition of law, and it is a proposition of law which has been applied in other Commonwealth jurisdictions.

My learned friend cannot point to one case in any other jurisdiction in which this has been held to be only an evidentiary onus. That is because it is a matter that the law assumes. Your Honours will see that at 86 in the joint judgment, point 4:

In this case, the law assumes –

EDELMAN J: It is almost never going to make much of a difference, is it, whether it is an evidentiary onus or a legal onus, because the party – if one assumes for the moment that the party is the defendant – that has the evidential onus is usually, in cases of this nature, going to lead evidence in the nature of expert evidence, and then issues are going to be joined and the plaintiff or the applicant will respond with expert evidence.

MR WILLIAMS: That is a point that we differ from, with respect, the appellant’s submissions, because they seem to proceed on the basis that the information that would be available to prove one way or the other is always in the hands of the plaintiff. In this case it is quite to the contrary. If this airport was not going to be developed for some reason, contrary to all statements in the Council documents that I need to take your Honours to, it was quite within the power of the Council to call evidence to that effect, but it did not.

EDELMAN J: The point that I am making is that the real evidence that is going to be given is not speculation about all of the documents or speculation about the plaintiff’s position, it is some form of expert evidence as to, this is what the value is going to be and this is where it is going to lie in the future, in the hypothetical world.

MR WILLIAMS: Can I come to and address what would be the type of proof that would be required a little later in my outline, just after I have dealt with a few more matters of principle. I was just making the point that each of the judgments focused on this concept of fairness and justice, in particular, in circumstances where the defaulting party has made proof difficult. That is really the primary justification for the presumption being imposed.

I took your Honours to 87. That is the quote from Chief Judge Learned Hand. Justice Brennan also quoted from the same judgment at 105, point 9. At 89, point 6, your Honours will find, in what might be described as a purple passage, halfway down the page, after referring to McRae:

But the reasoning is not inconsistent with the application, in appropriate cases, of that presumption which, in our view, has much to commend it. Indeed, it is just and fair that the repudiating party should bear the onus of showing that the party not in breach would have made a loss on the contract.

BEECH‑JONES J: Mr Williams, what do you say was meant by the phrase “in appropriate cases”?

MR WILLIAMS: Well, the only cases in which their Honours took the view that it would not be appropriate were the aleatory contracts that were referred to at the top of page 88. The point that needs to be made about aleatory contracts, your Honours will see at the top of 88 that they are to be distinguished – the purely aleatory contracts are to be distinguished from those which are referred to immediately before. Those immediately before start at the bottom of page 87:

in the case of a contract where the outcome of the contract, if it had been fully performed, cannot be demonstrated, whether at all or with any certainty.

That is our case. That is McRae’s Case. That is Amann.

BEECH‑JONES J: What about the case the Chief Justice referred to earlier, about the computer racks? The department would never be expecting to recoup their costs over a contract where they are the acquirer of the computers. That is not a purely aleatory contract, either.

MR WILLIAMS: True, but there may well be other principles of loss, of damages, that might be applicable in those different types of cases. It is not to say that it could not be, if there was some profit-making element that was involved, or should have arisen, or was reasonably contemplated to have arisen from the installation of those items.

What we do not find in any of these judgments is the limitations that my learned friend says ought to be – the real issue is whether they ought to be, not what has currently been the law, because we just do not find the limitations that are expressed in my friend’s written submissions in any of these judgments. The possible exception of that is, he has got two minority judgments about evidentiary onus rather than legal onus.

Your Honours, back at my original theme, which is the justice and fairness rationale, Justice Deane at 126, point 5, also focused on “considerations of justice”, your Honours will see that about four lines down, under the heading “reliance damages”. And, of course, these two pages bear close reading, and we have analysed them in our written submissions, but for the purposes of the present oral submission, that is the point I would just wish to direct your Honours’ attention to.

GAGELER CJ: This all leads up to saying that Justice Brereton, at paragraph 73, correctly stated the law consistently with this analysis.

MR WILLIAMS: Yes, and, moreover, there is no error that would justify any appellate intervention in what he ultimately found.

GAGELER CJ: Or how he applied the law.

MR WILLIAMS: Yes.

GAGELER CJ: Yes, but in relation to the rule, you will just say there is no relevant qualification?

MR WILLIAMS: There is not, no.

GLEESON J: But fairness and justice do not lead straightforwardly to the presumption as you articulate it.

MR WILLIAMS: It is fairness and justice that arises in the context of the difficulty or impossibility of proof that has arisen by reason of the defendant’s wrongdoing, or the defendant’s breach of the contract.

GLEESON J: Still, the effect of that wrongdoing will depend on the particular case; it will not necessarily need to be redressed by the reversal of the onus.

MR WILLIAMS: There may well be cases – there are cases, of course, where it is not impossible or difficult, or not even forensically difficult, to prove what would have occurred on the proper counterfactual. The proper counterfactual here is not just the granting of a lease, it is the granting of a lease in a 25-lot subdivision which was contemplated to be the precursor to the development of this airport. And that is a very different thing from saying it is just a lease. It is a lease of a particular character carrying with it the value of being a leasehold interest, rather than a shed in a paddock, which was what the respondent ended up having, in this case; it is something quite different.

When one is looking at how to assess the counterfactual, it is important not to lose sight of the fact that the experiences that did occur at and before the time when this contract was repudiated do not reflect what was in anybody’s contemplation as to what would occur had the contract been complied with. I was just going to one last passage in Justice McHugh’s judgment, and the passage I have in mind is at 166, point 3:

The rule in McRae is satisfactorily based –

BEECH-JONES J: Sorry, what page was that?

MR WILLIAMS: Page 166, point 3.

BEECH-JONES J: Thank you.

MR WILLIAMS:

The rule in McRae is satisfactorily based on the broad principle of justice that, if the breach of the defendant has made it impossible to ascertain whether or not the plaintiff would have made a profit from the performance of the contract, it is only fair that the defendant should reimburse the plaintiff for expenditure which it has wasted as the result of the breach.

While I am here, your Honours will see that his Honour approached questions of onus rather differently from all the other judgments, saying at point 8:

No question of an onus being on the defendant can arise.

It seems to be because his Honour took the view that if it was impossible to assess what the outcome would have been, it is effectively an irrebuttable presumption. But we do not have any need to rely in particular on what Justice McHugh found in this case other than to state that his statement of the principle and the rationale for the principle is consistent with other judgments that I have taken your Honours to.

Those are judgments that – those principles arise whether or not one ultimately considers this to be an evidentiary or legal onus that is required to be addressed. What we have here is unanimity in the common law world, as far we can see, that it is a legal onus – the exceptions being the dissenting views of Justices Toohey and Gaudron in this case. But other than that, we have not identified any other case in the common law world and my friends have not put any in their submissions that identify the onus as only being an evidentiary one.

We make the point, of course, that Robinson v Harman requires a close focus on the appropriate counterfactual. The fundamental problem in this case is that the appellant’s arguments do not focus on the position that the plaintiff would have been in with respect to damages as if the contract had been performed. The fundamental problem for the appellant in this case is that it did not adduce or point to any evidence based upon the correct counterfactual.

GAGELER CJ: At what point in your argument are you now?

MR WILLIAMS: I am at item 5.

GAGELER CJ: Very well. Will it take long to complete item 5?

MR WILLIAMS: No, because I come back to that and deal with it in the rebuttal of the presumption section. May I continue?

GAGELER CJ: Yes, finish item 5, and then we will take the luncheon adjournment.

MR WILLIAMS: Perhaps I will take a moment to, even though we do address it later. Your Honours have seen in writing and orally, focus on primarily two things: the businesses were unprofitable at a time before the sunset date arose, and perhaps after – certainly we do not contend that they were ever profitable. But the environment in which those businesses were being undertaken was not the proper counterfactual.

Similarly, the moneys that were payable under the lease – your Honours might not be surprised that Mr Johnston got a bit sick of paying the rent when he had not got what he was promised under the agreement. But either way, none of those matters – which are the only two objective facts that are pointed to as to how any evidentiary onus could be fulfilled – were based upon an incorrect counterfactual. They did not take into account the position the plaintiff would have been in ‑ ‑ ‑

EDELMAN J: The development is the existing tanker. The development is to be treated, in your submission, in the same way as if the tanker had existed.

MR WILLIAMS: I am sorry, I missed your Honour’s analogy. It is a bit like that, but perhaps more, because the analogy is good so far as everybody contemplated that the whole idea of the exercise was for the value of the tanker to be exploited. And here, yes, it was clearly contemplated that the leasehold interest in the 25‑lot subdivision, once it was granted, would be exploited. But – one last sentence, if I may.

GAGELER CJ: Of course.

MR WILLIAMS: But when your Honours come back and focus on: what evidence was adduced, based upon the correct counterfactual, your Honours will find there is nil.

GAGELER CJ: Thank you, Mr Williams. We will take the luncheon adjournment now.

AT 12.48 PM LUNCHEON AJOURNMENT

UPON RESUMING AT 2.14 PM:

MR WILLIAMS: Your Honours, the presumption of recoupment will arise at least where it is impossible or difficult to ascertain what would have happened, had the contract been performed. There are a large number of references which we have given to your Honours in paragraph 6 of the outline. Could I just, without taking your Honours to them ‑ ‑ ‑

BEECH‑JONES J: Mr Williams, could you state that proposition again?

MR WILLIAMS: The presumption will arise at least where it is impossible or difficult to ascertain what would have happened, had the contract been performed.

BEECH‑JONES J: All right. So, it is not tied to whether the breach caused that, just the fact of that?

MR WILLIAMS: That is our first proposition.

BEECH‑JONES J: Yes. Thank you.

MR WILLIAMS: It is Justice Brennan who has the additional criteria that your Honour mentioned.

BEECH‑JONES J: I understand.

MR WILLIAMS: But Justice Brennan alone. I am not going to waste my time left by taking your Honours to each individual passage, but I just wanted to read out to your Honours a few observations about what was encompassed within the notion of “impossible or difficult”. We have given your Honours the page numbers, but I am just going to give your Honours the pinpoint numbers as well. At 86, point 2, the Chief Justice and Justice Dawson referred to it as being:

not possible to determine what position the plaintiff would have been in had the contract had been fully performed –

At 105, point 2, Justice Brennan:

impossible for the plaintiff to prove . . . the net value of his contractual benefits –

At 112, point 8, Justice Brennan:

the value of the advantage would have been substantial, but it cannot be quantified with any degree of accuracy . . . it is impossible to say whether or not the value of all the benefits to which Amann would have been entitled had the contract been performed ($B) would have exceeded the cost of performance . . . Nor is it possible to say whether there would have been a sufficient net value of the benefits –

At 113, Justice Brennan:

The value of the commercial advantage . . . could be ascertained only at or near the end of the contract period and only in the light of the history of Amann’s performance of the contract.

At 126, point 5, Justice Deane:

it is impossible or difficult to establish the value of any benefits which the plaintiff would have derived from performance by the defendant –

At 126, point 8, Justice Deane:

where proof of value is impossible or difficult –

At 130, point 5, Justice Deane:

it is impossible to do more than speculate about what Amann’s approximate proportionate chance of obtaining a further contract . . . would have been if the contract had run its course.

At 134, point 1 – this is the start of Justice Toohey’s judgment, where his Honour expresses the:

general agreement with the principles –

set out by the Chief Justice and Justice Dawson, subject to two matters – that is, the onus of proof and application, but otherwise a general agreement with the statements of principle. At 135, point 2, Justice Toohey:

where profits are indeterminate or the outcome of the contract uncertain –

At 137, point 2, Justice Toohey:

Reliance damages are a means of compensating the plaintiff where there has been no loss of profits or, more likely, where the plaintiff cannot prove loss of profits with any certainty.

Of course, his Honour’s mention there of a compensation where there has been no loss of profits accords with Justices Mason and Dawson, where their Honours said, at bottom of page 87, that the principle can apply when there has been no loss of profits but still allowing the recoupment of the expenditure. Page 137, point 5, Justice Toohey:

where a breach of contract has cut short contractual expectations so as to prevent an assessment, or a reasonably accurate assessment, being made in the normal way.

That is quoting Justice Burchett in the Full Court. At 137, point 7, Justice Toohey:

where profits are difficult or impossible to quantify or where the outcome of the contract is not predicable –

Page 104, point 4, Justice Toohey quoting from McRae:

“The fact is that the impossibility of assessing damages on the basis of a comparison between what was promised and what was delivered arises not because what was promised was valueless but because it is impossible to value a non‑existent thing. It is the breach of contract itself which makes it impossible even to undertake an assessment on that basis. It is not impossible, however, to undertake an assessment on another basis.”

That is the additional point that your Honour Justice Beech‑Jones raised with me, that is Justice Toohey alone. At 150, point 8, Justice Gaudron:

The best estimate of the chance of Amann’s contract being cancelled could be no more than an informed guess made in the light of the known facts.

At 153, point 2, Justice Gaudron:

the residual value of the planes is a matter of uncertainty . . . Thus, it would not be possible, applying that usual method of valuation, to make a reliable estimate of the value of Amann’s contractual rights.

GAGELER CJ: Mr Williams, just at a conceptual level, it seems difficult to me to treat impossibility of proof of a profit or loss on the contract as a threshold requirement for a rule that casts an onus on the defendant. If it was truly impossible, then the defendant could never discharge that onus.

MR WILLIAMS: And your Honour’s point is particularly apt, because there would be no point in having a rebuttable presumption, so there ‑ ‑ ‑

GAGELER CJ: The rule would not make sense if impossibility were a threshold requirement for the rule to apply.

MR WILLIAMS: Exactly, so when the judges in Amann were using that expression, they were talking about in terms of practical impossibility or difficulty, and that was the point that gave rise to the considerations of fairness and justice that justified the erection of the presumption. In the present case, one only needs to ask rhetorically, well, how would one seek to go about proving loss of profits?

So, how would the respondent prove its likely net profits over the 30‑year term of the lease based upon the correct counterfactual? The starting point would be that if the sewer was connected, it would have been overwhelmingly likely that the plan of subdivision would have been registered. That was because it was the only impediment. Justice Brereton described the possibility of that not occurring as “remote”, that is at Court of Appeal paragraph 134. But then, what should be assumed about the development of the airport? Having spent $1.3 million in connecting the sewer, it is likely that the Council would have done that which it could in order to progress the purpose of the subdivision, which is development of the airport.

But the problem is, what then? What does one assume about the development of the airport over the next 30 years in terms of content, extent, timing and the like, and how would that impact on actual or potential businesses that could be operated from the airport? The answer is, it is either impossible or difficult, as least within the conception of their Honours in Amann, for proof of that nature to be reliably given.

EDELMAN J: You call a quantity surveyor, you call an accountant, you call various experts to give evidence as to the possible scenarios and the likely profit in those various scenarios.

MR WILLIAMS: If one has a stable environment in which one can adopt that approach, yes. But if one is looking at a project that was envisaged without being fully conceptualised as to what it might look like, one can immediately see that any expert evidence based upon assumptions are likely to develop into one of those arguments that the courts find to be particularly unprofitable.

STEWARD J: Yes, I was going to say, the accountant would ask you, what assumption do you want me to make over 30 years and then you would have one of those trials where you have to fight over assumptions.

MR WILLIAMS: The first assumption would be, what assumptions do we make about the development of the airport?

EDELMAN J: But that is going to happen anyway because, assuming you are right and the onus is on the respondent, the only way that the respondent discharges that onus is by leading some form of evidence – probably expert evidence – as to what might potentially have happened. There will be a contest about the assumptions upon which that evidence is based, but your basic point, as I understand it, is just that one party has to start with that difficult exercise, and the best person to start with that difficult exercise is the contract‑breaker.

MR WILLIAMS: Indeed, and in some cases – not this one – one might say that the possibility of adducing evidence is more likely to be the part of the plaintiff, but not in this case, because essentially one is talking about or discussing the possibility of the airport being developed in circumstances where the Council itself has a large measure of influence and control as to the nature and extent that that occurs.

If it was a case, for example, that unbeknownst to all of us there is some hidden impediment to this airport being developed, the Council could come along and say, notwithstanding all the bright, shiny documents that we have that show our vision for the expansion, development and commercial exploitation of this airport, there is something that means that it cannot be done – the sewer cannot be connected – some other possibility. They are matters that are in the province of the Council to adduce, not in the hands of the plaintiff, and what happened here is that ‑ ‑ ‑

BEECH-JONES J: But that is not really a consequence of their status as wrongdoer.

MR WILLIAMS: No, no.

BEECH‑JONES J: That is a consequence of the status that they are the Council, and that it is really just playing out, or evidence is weighed against who has the power to prevent it.

MR WILLIAMS: Your Honour is quite correct about that. The starting point is that it is a very problematic and difficult exercise, and, for the reasons that have been articulated in Amann, there is a policy choice that is made about who has that difficult starting point. But what is sometimes said against that proposition is that, no, ordinarily, the evidence is in the hands of the plaintiff. But that is not ‑ ‑ ‑

EDELMAN J: But what is being put to you is that it is a completely different issue, that is a Blatch v Archer‑type question, which might arise, it might not arise, but it is completely separate from the type of issues that we are considering.

MR WILLIAMS: I accept that, I accept that. I have said what I want to say about it. The propositions for which we advance, and which are soundly based in Amann, do not depend upon that as a precondition or as a limitation.

The next point that I wish to make – and I have really touched upon it already – is that the Court of Appeal made no error in failing to discern the first limitation for which the appellant now contends. This is the one about risk – contracts that provide for a speculative benefit, is the way it is put. That limitation did not arise expressly or implicitly from any of the judgments in Amann. This is really a new proposition that is being put to your Honours for your Honours’ consideration. It is said to be rooted in Amann, but one looks in vain for where. The reason it has not been expressly addressed by Justice Brereton is because no argument was put to the Court of Appeal by the appellant’s then‑legal advisors, and for very good reasons, not expressly dealt with.

The new proposition that is now urged upon your Honours is that where a contract confers no more than a chance to secure a benefit, it is speculative and risky, so the presumption does not apply. That is the way it is put. But most contracts involve some level of risk. Those that were involved in Amann and McRae certainly did. In our submission, there is no principled basis upon which risk of that nature could be measured by some sort of sliding scale for the purpose of determining whether or not the presumption of recoupment arises in the first place. There would be significant scope for dispute and argument as to the level of risk involved in any particular contractual arrangement.

The new limitation for which the appellant contends is neither principled nor workable if it is a precondition to the presumption ever arising. Of course, if it is a precondition, then one immediately observes the circularity of what is occurring. In identifying whether the presumption arises, the appellant is really calling in aid matters that might be legitimately explored at the second stage of the inquiry, namely, the question about whether the presumption has been rebutted.

GORDON J: Could I ask you, then, about the top of page 88 in Amann, where Chief Justice Mason and Justice Dawson with purely aleatory contracts?

MR WILLIAMS: Sorry, deal with?

GORDON J: Purely aleatory contracts.

MR WILLIAMS: Yes. What their Honours dealt with is what they have described as purely aleatory, not some that might be thought to be akin to or analogous with contracts of a particular type which were contrasted with the type of contract that we have in the present case. I took your Honours to the bottom of 87 and over to 88:

the contract, if it had been fully performed, cannot be demonstrated, whether at all or with any certainty. This last type of contract, of which McRae and Anglia Television have been cited as examples –

and I interpolate, Amann and this case are examples:

is to be distinguished from a purely aleatory contract where, almost by definition, it would not be appropriate to apply the presumption –

So, there is a very, very narrow class of cases, and that is the only class of cases that are identified anywhere in any of these judgments to which the presumption ought not apply. In our submission, when one is looking at a presumption of this nature, clear rules are required in order to determine whether the presumption arises in the first place. There is no point in having a presumption if the inquiries at the second stage – that is, the rebuttal stage – need to be undertaken to determine whether the presumption arises at all.

The approach that is suggested by this limitation would operate to neuter the presumption and render the two‑stage process of presumption and rebuttal nugatory, or at least substantially indistinguishable. If embraced, the approach would effectively require the plaintiff to prove its loss in the usual way, the very consequence that the presumption is designed to avoid. The next part of our written outline deals with aleatory contracts, and I think I have already covered that sufficiently in answers to questions that I have earlier addressed.

As to the suggested third limitation that the appellant propounds, the first point to observe is that no member of the Court in Amann stated that as a confining feature. We deal with this matter in our written submissions at paragraph 54. What we submit is that the expression was used as a shorthand way for describing the heads of loss which were claimed and allowed in Amann.

This issue has been comprehensively dealt with by Justice Brereton at 58 to 68 of his reasoning, and we, with respect, submit that that was a correct analysis. The whole point, of course, of the premise of the agreement for lease was for the respondent to build the hangar and to operate its businesses from it. We have given your Honours, in footnote 53, the references to parts of the agreement for lease and lease that demonstrate, if a demonstration be necessary, that that was the case.

It is necessary at this point just to pause and deal with an argument raised concerning the article by Fuller and Perdue. We make these observations. First of all, the distinction between essential and incidental reliance was not embraced in Amann. The Court did not hold that for the presumption to be enlivened it was necessary to show that the expenditure was incurred in performing a contractual obligation. We deal with this in our written submissions at paragraph 36, and footnotes 30 to 31. Also, at ‑ ‑ ‑

GAGELER CJ: The expenditure in McRae, on this dichotomy, would have been incidental, would it not?

MR WILLIAMS: Yes. And another point we make is that there is no bright line between what Fuller and Perdue describe as the essential, as opposed to incidental reliance.

GAGELER CJ: And as I read the decision in Albert v Armstrong Rubber, the expenditure there would also have been incidental, would it not?

MR WILLIAMS: Yes. Although, as the Professor identifies, even in his article, the line between incidental and essential is not a bright line; there is room for debate about whether particular types of expenditure might fall on one side of the line or the other. Ultimately – in particular, I will just give your Honours the reference to the pages – we do not think that this is a significant matter in the context of the resolution of this appeal, but could I just give your Honours the reference to the pages in ‑ ‑ ‑

GAGELER CJ: Is this the article by Fuller and Perdue?

MR WILLIAMS: Yes, Fuller and Perdue. It is not ‑ ‑ ‑

GORDON J: What is the purpose of these references, please?

MR WILLIAMS: The purpose of these references is to identify that there is no bright line between incidental reliance and essential reliance. In any event, we respectfully submit that the American article was not particularly helpful in the task with which your Honours are concerned here.

EDELMAN J: If the rationale for a shift in onus is not that commercial parties generally recoup their pre‑contractual expenditure but instead is based upon the unfairness that is created by a contract‑breaker taking advantage of the uncertainties that its breach of contract has caused, then that rationale could not really justify any distinction between an essential or an incidental loss.

MR WILLIAMS: Indeed.

GORDON J: I think I interrupted you about providing us with those references in the article.

MR WILLIAMS: Yes, sorry, I will answer your Honour’s question first and then come back to your Honour Justice Edelman. It is pages 93, 94 and 95, this is at pages 1359 to 1361 of the – I think it is the first article. Your Honours might be aware that there were two articles, and there is a lot of ink being spilled about this issue. I want to address your Honours on one small matter that is of, perhaps, some help, particularly in dealing with the proposed limitation. That is because Fuller and Perdue explain that the cases are legion, in which reimbursement for reliance was granted which did not consist of so‑called “essential reliance”. It is at pages 1357 to 1358. I will take your Honours to this page if I could.

GAGELER CJ: What is the page of the article, please?

MR WILLIAMS: Page 91 of the article. This is the first of the two articles. At point 2 on the page:

On the other hand, the cases are legion in which courts have granted reimbursement for reliance which did not consist of “performance of the contract or necessary preparation therefor.” Aside from an extensive miscellaneous group of cases –

and those groups of cases are the two pages of footnotes that one finds on that page – that is the legion of cases:

in which courts have granted reimbursement for reliance which did not consist of “performance of the contract or necessary preparation therefor.”

The author came back to the issue in the second paper, at 1364. This is in footnote 78. Your Honours will see, at 1364, footnote 78 refers back to those footnotes that I have just referred to and says:

These cases suffice to show that the relief is not limited, as the CONTRACTS RESTATEMENT would limit it, to expenditures in performance of the contract, or in preparation to perform it ‑ ‑ ‑

EDELMAN J: Whereabouts on the page is that?

MR WILLIAMS: That is 1364, footnote 78.

EDELMAN J: Thank you.

MR WILLIAMS: And it is picking up the earlier reference in paper number one. In our submission, the presumption is not confined to cases where the plaintiff was contractually required to incur the necessary expenditure. It extends to cases where the expenditure has been reasonably incurred in reliance on the defendant’s contractual promises. We refer to our submissions at 36 and 54 in that connection. It is dealt with in the Court of Appeal at 60 to 68, as I have said.

STEWARD J: Mr Williams, was it ever submitted below that the expenditure on the hangar was unreasonable, in that sense?

MR WILLIAMS: No.

STEWARD J: I know there was an attack on your client’s business acumen and . . . . . business, but was it put in the context of that proposition, ever, that expenditure was unreasonably incurred?

MR WILLIAMS: No. Perhaps I had better answer that more precisely. The answer to your Honour’s question is no, but it was said that there was a lot of money spent on this hangar. But in terms of reasonably incurred, his Honour in the judgment has dealt with that. It is expenditure of the type reasonably incurred. His Honour, also in the judgment, identified the numerous communications between the parties that identified how the Council was fully aware that millions of dollars were being spent on this hangar.

I will just get my learned junior to provide the references, but his Honour found that it was reasonably contemplated that this expenditure would occur, and with full knowledge that an iconic building was building built. In our submission, although it does not expressly say so, the appellant’s minimalist view of reliance damages amounts to a challenge by a side wind of the reasoning inherent in the judgements in Amann about the availability of the presumption. On the appellant’s arguments, the results in Amann and McRae should have been that no presumption arose in the first place because each was a risky or speculative venture.

One only just needs to look at the results of those two cases to identify why the limitation for which the appellant contends is inconsistent with those decisions. For example, in Amann, there was no possibility of Amann recovering its expenditure during the contractually‑agreed term, but those features did not cause the High Court to treat the contract as won, which was no more than a chance to secure a benefit, or as a speculative contract. The recoupment principle was firmly held to be engaged in respect of such contracts.

In our submission, the present case, to the extent that it needs to – we say it does not, but to the extent that it needs to – also satisfies Justice Brennan’s narrower formulation. We deal with this at respondent’s submissions 57 to 58. The appellant’s repudiation or breach was one which denies, prevents or precludes the existence of circumstances which would have determined the value of the plaintiff’s contractual benefits. This is dealt with in Court of Appeal judgment 53.

We submit that because the contractual breach, in not registering the plan of subdivision meant that the intended development of the airport did not occur. Had the plan of subdivision been registered, it is likely that development of some sort would have occurred during the 30‑year counterfactual.

Because of the appellant’s breach, the nature, extent, and timing of the development – of any development – is impossible to know and difficult to predict, and so too is the consequence for the appellant’s past or future businesses. In terms of the notion that it is the breach itself which creates that problem, his Honour had no narrow view about what was involved in that concept. His Honour’s judgment was to the effect that, in Amann, the breach itself had had that consequence.

Moving to our next point – I am up to 13 in the outline. Although we have not heard much of it – anything about it orally today, the written submissions, or the written materials, seem to suggest that, in some way, the Amann principles are contrary to, or undermine, those in Sellars. Notably, five of the seven members of the Court who sat in Amann, also sat in Sellars; that is all except for Justices Deane and McHugh. There are numerous references to Amann in the joint judgment – I will just give your Honours the page numbers: at 39, picking up, well – I will not go to the footnotes – 350, 354, 363, 368, and 359 – but the references to Amann in that case detected, or identified, no tension or inconsistency in principle between the basis for rewards of damages for loss of opportunity on the one hand and reliance damages on the other. Of course, in the case of reliance damages, the plaintiff is giving up the prospects of ever recovering its net profits, to the extent that they exceeded its expenditure.

Further, it is always open to a defendant to provide rebuttal evidence, that is the purpose of the presumption being a rebuttable, rather than conclusive, presumption. In our submission – contrary to what is said in the appellant’s reply submissions at paragraph 3, footnote 5 – the reference to Amann, at page 349 of Sellars, did not refer to Amann as a loss of opportunity case. In particular, the footnoted passage in the judgment of Justice Deane, at 118 to 119, involved that part of his Honour’s judgment where he discussed under the heading loss of opportunity before discussing under the heading “Reliance damages” – sorry, before discussing the principles in relation to those two matters under those headings.

As to the appellant’s reply submissions, paragraph 4, footnote 7, and the appellant’s reliance on Mann v Paterson Constructions, a defaulting party is not to be rewarded, particularly where its conduct has rendered the proper assessment of damages impossible or difficult. Mann v Paterson is to the effect that a defaulting party is not to be punished, effectively, for breaching its contract, but where its conduct has rendered the proper assessment of damages impossible or difficult, it is not a matter of punishment; it is a matter of where one places the burden of establishing that which is impossible or difficult by reason of the defendant’s breach.

Just to answer your Honour Justice Steward’s questions of me, the references to expenditure on the hangar being contemplated and reasonably incurred, it is paragraphs 24, 68 to 70, 109 to 115, 146, 149 and 168.

STEWARD J: Thank you.

BEECH-JONES J: Mr Williams, is that the Court of Appeal or the primary judge?

MR WILLIAMS: I am sorry, that is the Court of Appeal.

BEECH‑JONES J: The Court of Appeal.

MR WILLIAMS: I will now turn to the rebuttal of the presumption, and we make the first and obvious point, which we made at the outset, that the rebuttal evidence needs to address the correct counterfactual. The appellant adduced no evidence about this. I have already identified the two pieces of contemporaneous material that it relies upon: the unprofitability of the three businesses prior to the sunset date, and the default in the payment of licence fee. But that, with respect, is a feeble attempt to displace a presumption that is based upon, or requires consideration of, a different counterfactual.

BEECH-JONES J: Just remind me, beyond the sewage connection and the subdivision, what else would be involved, firstly, to get it registered to get compliance? Were they the only obstacles?

MR WILLIAMS: The sewage was required in order for the subdivision to be approved.

BEECH-JONES J: Yes.

MR WILLIAMS: And then the lease to be granted, or the lease to come into existence.

JAGOT J: Subdivision to be registered.

MR WILLIAMS: Yes, I am sorry.

JAGOT J: It was approved, was it not?

MR WILLIAMS: I am sorry, yes, of course. Your Honour is quite right. The subdivision has been proved years before. This was about getting it registered so that it could be commercially exploited.

GORDON J: So you could sell the lots.

MR WILLIAMS: Yes, you could sell – if one owned one, one could sell them. If one leased one, one could sell the lease.

GORDON J: Correct.

MR WILLIAMS: And Mr Johnson consistently complained about not having bankable tenure. That is one of the two complaints. The other is that he did not have a subdivision which would have naturally or been reasonably expected to lead to the type of commercial activity that had been in everybody’s contemplation throughout.

GORDON J: Mr Gleeson took us to some materials, including some maps. Do you propose to address that or provide the other material upon which you ‑ ‑ ‑

MR WILLIAMS: I do.

GORDON J: At an appropriate time.

MR WILLIAMS: I was proposing to do that at the end, and I was hoping to leave myself enough time. It is not the sort of task one usually engages in in this Court, but it is necessary to have a proper understanding of where the evidence did lie in terms of any rebuttal of the onus. It all pointed in our favour, not the other way.

I have already addressed, early in the submissions, the proposition that what we are talking about in terms of an onus or a presumption is a legal proposition. Contrary to what my learned friend may have suggested, we understand the same position to prevail in all other jurisdictions, in particular some reference to a recent decision of Yam Seng. This is an English decision. It is in the joint bundle of authorities 4, at page 1114.

GORDON J: It is tab 30.

MR WILLIAMS: Yes, I am sorry. The particular page number is 1141, or page 553 of the reported case. It probably starts at the page before, page 1140 of the materials, and page 552 of the report. Your Honours will see under the heading “Claim for wasted expenditure” reference to Robinson v Harman, and then in paragraph 187 at the foot of the page:

The advantage of claiming damages on the “reliance” basis is . . . where such a claim is made, the burden of proof lies on the defendant to show that the expenditure would not have been recouped –

That is in the language of legal onus, and reference to CCC Films with similar language of legal onus is referred to and, in our submission, that is but one example of the approach that the English cases have adopted in terms of the onus being a legal one rather than an evidentiary one.

GAGELER CJ: It is also a fairly straightforward approach of saying, well, what is being recovered is the wasted expenditure. That is the damage, the wasted expenditure.

MR WILLIAMS: Yes. Whilst analysing it in terms of lost profits might be a proxy – one might be regarded as a proxy for the other – essentially we are in a position in this case, and in other cases, for example, where wasted expenditure is claimed, where on the faith of the contractual promise, moneys have been expended. That would prima facie demonstrate a loss, because if one does not get what is promised in exchange then one has suffered the wastage of the expenditure.

I need, at this point, to go to Berry and address that case because the particular passage that is relied upon is a little curious. It is in volume 1 of the authorities. I am afraid I do not have the tabs, but it is page 38. In this regard, we particularly rely on our submissions at respondent submissions 29 about why we say that this does not stand for the proposition – sorry, I have the wrong paragraph number.

BEECH‑JONES J: I think it was paragraph 29 of Berry, Mr Williams.

MR WILLIAMS: Yes, I am sorry. It is paragraph 29 of Berry, yes. Paragraph 53 of our submissions, I am sorry. Now, as the Court of Appeal explained at paragraph 54:

the obiter remarks of Bell, Keane and Nettle JJ in Berry v CCL Secure Pty Ltd apparently embrace the approach of Brennan J, that was for the purpose of illustrating the more general proposition that a wrongdoer’s conduct may sometimes shift the burden, rather than of rejecting the approach of Mason CJ and Dawson J –

It may be accepted that the reference to the Commonwealth bearing the ultimate onus of proving at least a prospect that is relied upon in that paragraph is rather cryptic. Cross on Evidence describes the passage as “somewhat obscure”. What is clear is that the remarks, insofar as they relied upon Justice Brennan, were adopting an ultimate or legal onus – because that is what his Honour found – rather than an evidentiary onus as being the appropriate approach.

Furthermore, the footnotes to paragraph 29, they reveal that Justice Brennan’s judgment at 107 to 108 and 113 are being referred to. And they, of course, are what might be described as the purple passages in those judgements. At 107, point 8 – one of those footnoted passages – Justice Brennan refers to the onus of proof. At 108, point 7, he states the nature of that ultimate onus in clear terms that involved the balance of probabilities.

The first point we would make about this passage is that, to the extent that it is helpful in looking at the underlying principle rather than being an example of the sorts of considerations that are in Armory v Delamirie, the joint judgment is apparently accepting the majority view in Amann, that is, that the defendant bears the ultimate or legal onus. I still have to deal with the curiosity that arises in the expression halfway down paragraph 29 on page 170. We think that the clue to it is this: the first ‑ ‑ ‑

GORDON J: This is the reference to “ultimate onus”? Is that the bit?

MR WILLIAMS: Yes:

the ultimate onus of proving at least a prospect –

We think that the clue to this is, if one starts at about point 2 on the page:

As Brennan J explained –

And then there is a reference to footnote (52). Then your Honours will see further down:

By contrast, as Brennan J observed –

Then there is a reference to footnote (53). The paragraph at footnote (52) is referring to the reliance damage-type proposition. The judgment is indicating that because the Commonwealth repudiated and thereby deprived Amann of the ability to establish the contract it would have returned sufficient to recoup the contractual expenses, it was to be presumed that Amann would not have incurred its expenditure in reliance on the contract without a reasonable expectation:

and thus it was just that the Commonwealth should bear the ultimate onus of proving at least a prospect –

Just pausing there, if one looks what that is contrasted with, it is contrasted with the second alternative derived from footnote (53), about a claimant seeking “expectation damages” and having to prove on the balance of probabilities that the:

proof to the to the level of a real (more than negligible) possibility is regarded as enough.

That appears to be a means of contrasting the legal onus that arises in the first situation and the legal onus that arises in the second situation. All that their Honours were identifying is that ordinarily, without the benefit of the presumption, a plaintiff would have the ultimate onus of proving at least the prospect. But because there is a reversal of that onus, the Commonwealth has that ultimate onus of proving at least a prospect, but it does not mean that that is all that the Commonwealth would have to prove in order to discharge its burden.

The clue is in the words “at least”, as his Honour Justice Edelman perhaps may have foreshadowed in earlier questions. One thing is clear, if this is said to be – these obiter remarks are not remarks that carefully analyse the judgments in Amann for the purposes that we are interested in them. Rather, they are making those observations in the context of describing how the principle that sits behind the presumption in Amann Aviation is similar to, or consistent with, the type of presumption that arises in other areas of the law.

It is to be observed, also, that Justice Brennan at 106 expressly uses the words “reversing the onus”. There cannot be any doubt that the joint judgment in these obiter remarks is seeking to say something different from Justice Brennan.

BEECH‑JONES J: Mr Williams, what do you is the reference to either of the presumptions in paragraph 30?

MR WILLIAMS: I know your Honour asked this of my friend – can I come back to it ‑ ‑ ‑

BEECH‑JONES J: Yes, certainly, just take it on board.

GORDON J: I think I answered, and I think the answer that I proffered might be what is on the foot of – in 29, back on 169. It may not be the answer, but it seems to be at least an available option.

MR WILLIAMS: Yes, may I just come back to it, I am not entirely sure. It has to be said that the discussion is a little unclear.

GLEESON J: I may be saying the same thing as Justice Gordon, but it seemed to me that one of the presumptions related to claim for reliance damages and the other presumption relates to a claim for damages for loss of a chance.

MR WILLIAMS: I think that is also an available explanation. It does seem to identify the two different propositions that were being considered and contrasted immediately above.

EDELMAN J: That might also explain the use of the words “at least”, because in the case of a loss of a chance claim, the “at least” onus is an onus to prove a real and more than negligible possibility.

MR WILLIAMS: Yes.

EDELMAN J: And in the case of a claim that was not brought on the basis of a loss of a chance, it is a claim of proving loss – the substantive loss.

MR WILLIAMS: Yes. And the use of the expression “ultimate onus of proving” at least a prospect was not meant to suggest that there was anything other than a legal onus involved.

The next point that we would wish to make is that the reliance that is placed on Bosanac in the reply submissions at 14, footnote 21, is misplaced. That is because the world “presumption” is applied to a disparate range of distinctive legal techniques and doctrines, and a rebuttable presumption of law may be conceived as a rule of law – we refer to Masson v Parsons, I do not need to take your Honours to it; we have given your Honours the reference – but, quite clearly, when one is talking about different presumptions such as presumptions of resulting trust and advancement, one is not necessarily engaged in the same level of discourse as we are in this case when we are speaking of the presumption of law that is involved in the rebuttable presumption of recoupment.

I have taken your Honours to the passage already, so I will not go back to it, at 86, where the Chief Justice and Justice Dawson said the law “assumes”. In our submission, the presumption would be rendered toothless if it could be rebutted merely by pointing to some evidence that suggested there was a prospect that a plaintiff might not recoup its expenditure. One sees just how far the appellant needs to push this proposition in its written submissions.

In its summary of oral outline today, your Honours will have observed in paragraph 4 that all that is said that has to be proven – this is on the basis that it is an evidentiary onus – is for a:

contract breaker to point to or adduce some evidence from which it might be inferred that the innocent party, absent breach, would not have recouped some or all of that expenditure.

It gets worse when one looks at the formulation in paragraph 8 of the speaking notes, where my learned friends say this:

even if the presumption arises, its ‘rebuttal’ requires no more than the contract breaker point to or adduce some evidence from which it could be inferred that there was a prospect that the innocent party would not have recouped some or all of the expenditure –

That proposition, all that that is required, would render the presumption toothless. I now wish to deal with the correct counterfactual, about which I have already said a number of things.

The correct counterfactual requires assumed compliance with the agreement for lease, which would have resulted in a registered plan of subdivision. The development of the airport, along the lines of subdivision, is its ultimate purpose. As both the primary judge and Justice Brereton found, the registration of the subdivision was the first step in the eventual development of the airport. These things were tied together; there is no point in having a subdivision if you were not going to develop the airport.

So, what was contemplated, post‑registration, was a leasehold interest in a subdivision of an airport which was being developed in accordance with Council plans. But that is not what the plaintiff received – or not what the respondent received. Instead, it attempted to conduct its businesses on an isolated site, not separately titled, with no other lots created in the vicinity for potential commercial development – that is at Court of Appeal 120 and 119. Mr Johnston, who was cross-examined about these businesses, described it as being left in the middle of a field, rather than in a subdivision that was supposed to be the precursor to the development of the airport.

We have given your Honours some of the references there, in case your Honours need to delve into the detail, but he was making the point that he was not getting what he was promised, and his businesses were being – he was trying to conduct his businesses without – when I said “promised”, I should have said “contemplated”. But when one looks at the correct counterfactual, one must look at the likely position if the contract had been performed. If the contract had been performed, he would have had a leasehold interest in a 25-lot subdivision, the whole purpose of which was to provide for development of the airport.

STEWARD J: Mr Williams, was there any evidence of a business plan showing forecast revenue, pre‑ and post‑ registration, or anything like that?

MR WILLIAMS: There was not, there was not.

STEWARD J: Was your client cross-examined about whether he expected to make losses in early years?

MR WILLIAMS: I think the answer is ‑ ‑ ‑

STEWARD J: Or gave evidence about that?

MR WILLIAMS: I think the answer is, no. I think the answer is no. The proposition that was being put to him was, look, these businesses lost money, therefore it was all hopeless, this was a hopeless venture, a white elephant, and why we are here. That is the thrust of the cross-examination; I probably do it myself and my learned friend, Mr Cook, who conducted it, at a disservice – but that was the thrust of it.

STEWARD J: Thank you.

MR WILLIAMS: Now, Justice Brereton’s references to “speculation” – Court of Appeal, judgment 135 – need to be seen in the context of his Honour’s quote from Justice Deane at 130 to 131. Can I just take your Honours to Justice Deane’s judgment there. Sorry, I have lost my passage.

BEECH-JONES J: I think it is 127 – is that what you were talking about – of the Court of Appeal judgment? There is a quote from Justice Deane in 127 of Justice Brereton’s judgment.

MR WILLIAMS: Thank you, your Honour.

BEECH-JONES J: It is 127 on page 175 of the core appeal book.

MR WILLIAMS: Yes, I am sorry, that is the passage that I was seeking to locate. Yes, it is Amann at 130 to 131, but it is sufficient if I use paragraph 127 of the Court of Appeal’s judgment. His Honour Justice Brereton said:

To similar effect, Deane J said that the presumption “will not . . . be displaced merely by the circumstance that the benefits which the plaintiff would have obtained from performance by the defendant included the chance some more remote benefit and it is a matter of speculation whether that ultimate benefit would have in fact been obtained or by the circumstance that the perceived ‘benefit’ which the plaintiff sought and for which she incurred the past expenditure is something . . . which . . . is not capable of being objectively valued monetary terms”.

The quote is therefore set out to that effect. It is in that context his Honour was considering, well, what ‑ ‑ ‑

GORDON J: What paragraph does this relate to in the subsequent judgment of Justice Brereton? Is it 134? You said to us, I thought, that you should read that paragraph by reference to that which you have just taken us to, and I just do not recall what paragraph it was.

MR WILLIAMS: It includes 134, but also 138 – sorry, 135.

GORDON J: Thank you.

BEECH-JONES J: Mr Williams, could I ask you about 134?

MR WILLIAMS: Yes.

BEECH-JONES J: It is quite a long paragraph. If you go two‑thirds of the way down the paragraph, Justice Brereton appears to accept that the redevelopment of the airport was just not going to happen in the short term. He notes all the primary judge’s findings, and then says that they:

address only the short term, and not the prospects of development –

MR WILLIAMS: Can I make two points about that. First of all, it is important to focus on the correct counterfactual, that is, the correct counterfactual is the subdivision is registered, and none of this evidence involved as subdivision that was registered, and then what would happen. The first point.

BEECH-JONES J: Yes.

MR WILLIAMS: The second point is that his Honour – so, yes, his Honour was saying in the short term they had not done it, because he looked at material from afterwards, but the point is one does not say – the correct counterfactual does not involve saying, was the airport developed when there is no plan and subdivision? The correct counterfactual is, what would have happened, had there been a plan of subdivision? So, this evidence is helpful in a way, but it is not determinative about that issue.

BEECH-JONES J: It is not determinative, but it kind of suggests that, even if it had been registered, there was a lot more to be spent to get it developed. Is that right?

MR WILLIAMS: No, I do not ‑ ‑ ‑

GORDON J: Is your short point that the primary judge’s counterfactual did not go far enough?

MR WILLIAMS: The primary judge did not engage with the correct counterfactual.

GORDON J: And your point is that the – is Justice Brereton trying to say the primary judge did not go on to consider the “prospects of development over the 30‑year term”.

MR WILLIAMS: Yes. Her Honour did not take into account the Council documents at all, which was the subject of one of the challenges in the appeal.

GORDON J: So, is what follows after “ought to have been granted” – are they just the facts which are then what Justice Brereton says should be taken into account?

MR WILLIAMS: In considering whether there was demand for the type of development that might have been expected to occur had the subdivision occurred, that is relevant. It is not conclusive, but it is a pointer in our favour to the fact that the prospect of redevelopment of the airport was real. And, of course, when one adds the correct counterfactual, that the money has already been spent on the sewer, the money has already been spent in registering the plan of subdivision – it is then a question of what, then, in terms of development of the airport. The Council documents identify that some of the things that were being considered were sale, lease, joint ventures, all sorts of things which I propose to take your Honour to shortly.

JAGOT J: You have referred to the demand for the subdivision – just for my own clarity – the way I would understand it is, but for the breach, there would have been the subdivision. It is not a question of a demand for the subdivision. It would exist in compliance with the conditions of development consent, which included sewage and access and all the other things to make developable lots.

MR WILLIAMS: Yes.

JAGOT J: And that is how I understand your counterfactual as at the sunset date, whatever that final date was – I know it was extended.

MR WILLIAMS: Yes, it was sometime ‑ ‑ ‑

JAGOT J: That would have existed.

MR WILLIAMS: That is right.

JAGOT J: Then there is a question of, okay, well, what is speculative to some extent is the demand for those developable lots, which in in the power of third parties, obviously.

MR WILLIAMS: Yes, that is right, but the Council ‑ ‑ ‑

JAGOT J: In the context of a Council that wants the development.

MR WILLIAMS: Not only wants it; it has a vision for it that it sets out in glossy ‑ ‑ ‑

JAGOT J: Yes, it has a development control plan. It has given the development consent ‑ ‑ ‑

MR WILLIAMS: It has even more than that, but I am afraid I will need to tax your Honours’ patience ‑ ‑ ‑

JAGOT J: Yes, I understand.

MR WILLIAMS: ‑ ‑ ‑ with a little factual material in a moment.

BEECH-JONES J: Can I just ask this question. To the extent that it was contemplated that realistically, or on whatever standard, there was going to be a delay between the time of the breach and the development of the airport: one, do you have anything to say about Mr Gleeson’s point about how your client would have survived financially and, two, about the fact that the longer that delay went on, the greater the profits your client would have to earn to recoup – the operating profits to recoup the expenditure.

MR WILLIAMS: My answer is no, for the very good reason that the counterfactual involved something that did not occur – the very problem that the presumption is designed to deal with. What is clear is that there was relatively modest expenditure needed to at least develop, to some degree – I will take you to the documents in a moment – and that is even without the plan of subdivision. This land has never been – well, the evidence goes up to 2020. It was still not subdivided at that point in time.

GLEESON J: Is it a binary outcome, either damages of $1 or damage of $3.6 million?

MR WILLIAMS: I think in the way this case has been run, it would be, yes.

GORDON J: That is because they showed no benefit to you. So, one of the deductions from that calculation just put to you by Justice Gleeson are identification of a benefit, expenditure, not reasonable expenditure. Neither of those things were reasonably-incurred expenditure. Are there any other limitations or deductions that were the subject of evidence or findings?

MR WILLIAMS: No. I am sorry. The answer to your Honour’s question is this: there was no effort on the part of the defendant to say, from the $3.7 million you have to deduct X, Y, Z. There was no evidentiary attempt to deal with that, nor was it sought to be dealt with in submissions. There was a challenge to whether the expenditure had really been incurred, but that has been addressed on appeal, and there is no appeal from that. So, this is merely a question of, in our submission, the presumption arising and not being rebutted. It is as simple as that, when it comes to the facts of this case. Now, no doubt, there are all sorts of interesting legal questions about Amann Aviation, but so far as this case is concerned, the result should be straightforward.

GAGELER CJ: In terms of Hadley v Baxendale, it is the second limb, is it?

MR WILLIAMS: Well, we would say it is both, but it is at least the second limb. That is sufficient. In terms of what was contemplated, paragraph 24 of the appeal judgment is relevant. Paragraph 24, what was expressly contemplated ‑ ‑ ‑

JAGOT J: Sorry, 24?

MR WILLIAMS: The Court of Appeal decision. I am sorry, your Honour. Yes, paragraph 24, at the top of page 15 of the judgment:

there can be no doubt that the parties had in contemplation the expensive and iconic hangar which was ultimately constructed. As has been noted, the Council had already . . . granted development consent . . . communications between the parties expressly referred to Cutty Sark’s intention to spend millions of dollars on the construction of an “iconic” hangar designed by a renowned architect . . . “I will need a decent tenure as I will be spending between 2 to 3 million on a Peter Stutchbury building”.

There is other evidence about that, but that fairly encapsulates the ultimate conclusion about it. So, when we come to reasonable expenditure – whether the expenditure was reasonably incurred – his Honour said, in his Honour’s judgment, there is no challenge to this, but what that means is, whether the type of expenditure is reasonably incurred. I will just get the paragraph turned up for your Honours. Now, contrary to what is said in the appellant’s reply submissions at paragraph 6, Justice Brereton did not find that:

there was only “a prospect that commercial development would follow”.

Court of Appeal 134, he found that:

there was at least a prospect that commercial development would follow, if not immediately then later.

GORDON J: Is that paragraph or page?

MR WILLIAMS: I am sorry, it is Court of Appeal paragraph 134.

GORDON J: Thank you.

MR WILLIAMS: His Honour also found, at Court of Appeal 140, that:

In circumstances where what would have transpired had the Council performed its obligations was speculative but there was a high degree of likelihood (given that the Council was also the consent authority) that the Plan would be registered, and at least a prospect of further development of the airport producing a more conducive commercial environment for Cutty Sark’s business operations, if not immediately then sometime over the ensuing thirty years of the lease to which Cutty Sark was entitled, the Council could not and did not show that Cutty Sark would not, over a 30-year lease, have recouped its expenditure. Ground 5 succeeds.

As to the statement in the reply submissions at paragraph 7:

that, notwithstanding ambitious statements made by the appellant for almost two decades, no development has occurred.

Again, the appellant does not utilise the correct counterfactual; the evidence reveals that as at the date of the judgment, the Council had still not subdivided the land upon which the airport was situated. On the counterfactual, that was the precursor to the development of the airport.

I need to deal now with paragraphs 5 to 7 of the written submissions, which seem to suggest that the primary judge’s judgment was unaffected by the challenges in the Court of Appeal. Could I first of all take your Honours to the grounds of appeal; they are to be found in the core appeal book at 106 to 108. Your Honours will see that there were six grounds of appeal – I will just tell you where I am going, before I take your Honour to the detail – his Honour finds in the judgment that all six grounds of appeal are made out.

And your Honours will see, in particular, that when we are dealing with the rebuttal of the presumption, it is in paragraph 5 of the detail, and grounds are found in (a) through to (f) on page 107 – and your Honours will see that part of the challenge in subparagraph (c) was that her Honour had:

erred in finding, at [211], that there was “little demand” for particular lots and hangar homes at the airport and “little interest beyond the plaintiff’s [lot], in the further development of the airport”, when the evidence before the primary judge (including the respondent’s own documents) extolled the virtues of the proposed development of the airport –

All grounds of appeal were successful. His Honour, at the end of the judgment, goes through and identifies – his Honour, in the part of the judgment that is headed “Conclusion” summarises his findings about all of the grounds of appeal. Your Honours will find from paragraph 162 of the judgment:

Ground 1 succeeds.

Paragraph 163:

Ground 3 succeeds.

Paragraph 166:

Ground 2 succeeds.

Paragraph 167:

Ground 5 succeeds.

Paragraph 168:

Ground 4 succeeds.

And we succeeded on the damages claim as well. There had been, as is required in the New South Wales Court of Appeal, a document to be filed about challenges to facts, and we have given your Honours the reference to how that dealt with this factual issue about demand for hangarage and how that was successful as well. And his Honour found at 134 – the long paragraph that Justice Beech‑Jones was asking me about – the foot of that paragraph, this is about the last two and a half centimetres:

the evidence revealed a significant possibility of expansion and development of the airport, with Council documents over the decade from 2011 to 2020 consistently referring to the increased demand for hangarage and the Council’s ambitions for development of the airport; and had the Plan been registered, there would still remain today another 19 years until 2041 for that to occur.

The particular documents that his Honour had in mind we have summarised in paragraph 22 of our written submissions. I need to tax your Honours’ patience briefly just by going to a couple of them.

JAGOT J: Could I just ask for one point of clarification, while you are on 134. Is it correct that in 135, in the second‑last line, the word “Commonwealth” should be “Council”, that that is an error? Given that it refers to Cutty Sark, which is the instant case? I cannot make sense of that, unless you read “Commonwealth” as “Council”, myself.

MR WILLIAMS: Yes, we think that that is right. We think that his Honour is talking about – it is self‑evident that he is talking about Cutty Sark being unable to – yes, it should be “the Council”, I think your Honour was ‑ ‑ ‑

JAGOT J: Yes, I think it should be Council – I am just letting you know that is how I think it should be read, unless someone explains otherwise.

MR WILLIAMS: Your Honour is correct. I think we had all been reading Amann for too long at that point in time. The Council documents that his Honour referred to in that part of the judgment to which I just took your Honours are summarised in paragraph 22 of our written submissions. Prior to the paragraph 22 documents, of course, were the planning document that preceded the development. These are the ones which his Honour referred to.

In volume 2 of 2 of the respondent’s book of further materials, if your Honours go to page 168, this is a Report to Ordinary Meeting of Council – 15 August 2012. It is a recommendation to seek to endorse three major infrastructure projects under the Hunter Infrastructure and Investment Fund grant opportunity. Your Honours will see at point L on the page, the second of those is Cessnock Aerodrome Terminal. Your Honours will see that what is required for this type of funding, at line P is:

Nominated projects must be “shovel ready” in terms of having sufficient detail –

At page 169, point S is the commencement of the Cessnock Aerodrome Terminal project:

To provide terminal space, offices and hangar space for businesses looking to establish and expand at Cessnock Airport.

The background at point G on page 170 is to:

Promote economic and tourism development across the local government area –

Your Honours will see at point J:

This year Council has received around twelve requests for both hangar space and office space from businesses looking to establish or expand at Cessnock Airport and, at present, Council is unable to satisfy this demand.

At point K:

in the short-term, this demand from businesses wishing to establish within the local government area (economic benefit); provide an ongoing revenue stream for Council; and bring an iconic building into public ownership –

This is at a stage where the Council was contemplating buying the hangar from Cutty Sark.

BEECH-JONES J: Mr Williams, do we know how much money they were asking for?

JAGOT J: $2 million, was it not?

MR WILLIAMS: For this grant, yes, it was $2 million.

BEECH-JONES J: $2 million?

MR WILLIAMS: Yes. This is, of course, at a time after the sunset date, no plan of subdivision registered. The attached fund document at page 174 identifies, at 176 the “Funding sought” is “$2,000,000”.

BEECH‑JONES J: I see.

MR WILLIAMS: Your Honours will see at 177 – I am not going to read this all aloud, but your Honours will see “Concise description of the project” at 177, lines F to N. Your Honours will see that:

The building proposed to be acquired is a striking development.

And we get to see a picture in a little while. It says:

This is an opportunity to bring an iconic building into public ownership . . .

. . .

The fit‑out would also need to take into account (and be designed to accommodate) any potential future expansion of airport operations including regular passenger transport.

Then, at page 178, some features of Cessnock Airport, between lines J to K. At P to R:

Council took back management of Cessnock Airport –

Which is a nice way of describing it:

Since then, Council has received more than ten requests for hangar space and office space from businesses looking to establish or expand at Cessnock Airport . . .

This demand for space includes several companies looking to establish businesses in the region.

Then:

The outcome will be several new businesses with a presence at Cessnock Airport.

In addition, existing businesses operating . . . will now have the opportunity for a “shop-front” presence in the new terminal building.

Now, there is lots and lots of this. I am not going to go and read it all to your Honours, but can I commend to your Honours an examination of it, if your Honours are concerned with the factual matters.

GAGELER CJ: All of this is in support of what Justice Brereton said at paragraph 134, is it?

MR WILLIAMS: It is.

GAGELER CJ: Yes.

MR WILLIAMS: It is. If one is looking at what are the possibilities and prospects ‑ ‑ ‑

GAGELER CJ: So, if we want to drill down into the detail, you say it is in paragraph 22, and all the documents are here. Did you want to show us a picture?

MR WILLIAMS: I do. Your Honours would be shocked to know ‑ ‑ ‑

BEECH‑JONES J: This was a $2 million project to buy your building.

MR WILLIAMS: This was just to buy our building. The other documents go further, and relate to the development of the whole airport.

BEECH‑JONES J: Right.

MR WILLIAMS: The next one is at January 2014, at page 186. This deals with the “Cessnock Airport Strategic Plan” referred to at page 190, lines F to K. “Vision” at 191:

A well-planned and serviced aerodrome facility managed in a manner that attracts environmentally responsible economic development opportunities to the Cessnock region.

The next few pages are ‑ ‑ ‑

GORDON J: The next bit is:

This strategic plan is based on the assumption that Council wishes to retain an operating aerodrome on the current site.

Consistent with its other vision.

MR WILLIAMS: Yes. Then, in terms of its perceived benefits and location, they are at 195, in the right-hand column between O to V. In terms of the “Objectives”, your Honours will see them at 200:

Promote economic and tourism development across the LGA –

And in terms of the summary ‑ ‑ ‑

GORDON J: Can I ask a question. Where it says, provide a suitable revenue stream – and it was also in the former document – is that a revenue stream from leasing the hangars?

MR WILLIAMS: This is talking more generally about the airport, about economic activities from businesses that would establish themselves or be established already in the ‑ ‑ ‑

STEWARD J: I am a little bit confused. The earlier document you took us to included a proposal by Council to buy the hangar.

MR WILLIAMS: It did.

STEWARD J: For $2 million?

MR WILLIAMS: It did – sorry. It included a proposal to buy the hangar for $950,000 and to refurbish it to use it for a different purpose.

STEWARD J: And this is after deregistration of the company?

MR WILLIAMS: No, before.

STEWARD J: Before. Okay.

MR WILLIAMS: This was not an agreed position with Cutty Sark, of course.

STEWARD J: Yes, I see.

MR WILLIAMS: Of course, what Cutty Sark has at this time is the hangar in the middle of a paddock. At 206 is the 2014 expression of interest for resource allocation. Page 207, we rely upon. We also rely on page 210 – the “ECONOMIC ASSESSMENT: BENEFITS”. Your Honours might see it, between N and O:

On the western side of the airport there are large tracts of land available for development for aviation and related business investment, however, there is no connection of sewer or water on this part of the site, which has drastically impeded investment as well as inhibiting the expansion of existing businesses.

JAGOT J: What page was that, again?

MR WILLIAMS: Page 210, between N and P.

BEECH-JONES J: Mr Williams, on 208, the budget – the funding they are seeking is about $7 million, is that right?

MR WILLIAMS: Yes. Yes, and at that time, your Honours will see, up the page, “Sewer connection”, up the page, $861,000.

BEECH-JONES J: Right. Did they get the $7 million?

MR WILLIAMS: It does not appear so.

BEECH-JONES J: Does that not impact on – even allowing for the – on the assumption they had subdivided, the prospects they would have developed the airport?

MR WILLIAMS: No, because if one is going to spend the money to connect the sewer, create the plan of subdivision, one does not stop the natural – the expectation is that one does not stop there, one spends the money for a purpose.

BEECH-JONES J: The natural expectation is, if you have the money. Is this not suggesting that they did not have the money to take the development on? They had to get funding for it.

MR WILLIAMS: There are a number of different ways it could be funded, which are explored in these documents – some of which are merely from grant funds, some are from borrowings, and some are from sale of some of the assets that might be created or available as a result of other development of the airport. Your Honour, the other passages concerning sewerage is at 211, between M and N:

The connection of the sewer will enable additional land to be available for development (as it will no longer be required for on‑site sewage management systems), while the connection of water will unlock proposed development areas on the western side of the airport and will allow existing aviation‑related businesses to expand due to the removal of the restriction on the size of hangars . . . This will result in phased revenues from additional aviation‑related developments of $275,600 per annum.

Then your Honours will see that the timeframe for all this to occur – it is a fairly short timeframe for it to happen – page 213, it can be dealt with in a little less than two years.

Can I finally come to the document with the promised photo on it. It is at page 215. The Cessnock Airport Strategic Plan figuring prominently, the hangar that my client created, spent money on building, but which the appellant does not wish to reimburse it for. In terms of the summary – in terms of the documents here, your Honours will see that the sewage has still not been connected – this is 229, C to E. Your Honours will see a “Precinct Masterplan” at 240. Precinct 2 includes:

Additional private hangars the length of the runway –

This is between M and P, an:

Historical museum area

Extension of Runway (if external funding available) –

For Precinct 3 are:

Area for Commercial Business Opportunities –

The business plan is at 241 to 242. Your Honours will see between E and F that the business plan includes:

The market place has also identified some unusual business opportunities including the potential to allow for on‑site accommodation for an owner with their plane.

That is the hangar homes. Financial analysis is at 243 to 244, and the precinct plans are at 262. What we do know is that – in this document somewhere – that the area has still not been subdivided. Yes, at page 227, line G, your Honours will see that the plan is described in lot 2 of the deposited plan. In other words, the subdivision still has not occurred.

Now, your Honours, as against that evidence, which is some evidence of demand – albeit that it was demand even without the subdivision having been registered – we submitted to the Court of Appeal, and it was accepted, and we submit to your Honours, that there just was no evidence that was adduced by the Council that would have even satisfied an evidentiary onus, if that was all that required – we say more was required – that there was no evidentiary burden, let alone a legal burden that was fulfilled in terms that would operate so as to rebut the presumption.

This was a case where the Council did not seek to go into evidence at all about the prospects of the development. And in those circumstances, such evidence as it was able to point to when it came up to the appeal courts was only evidence that was not based upon the correct counterfactual, in any event. In those circumstances, whether it be a legal or an evidential onus, it was not made out by the Council. Now, in that regard, the burden of the Council would have been to establish that Cutty Sark would not have recovered its expenditure over a 30‑year period.

The last point that we would make, your Honours, arises from a remark made by Justice Deane in Amann at 117 to 118. This is where his Honour is considering the doctrines of restitution and unjust enrichment. His Honour speaks about that from about point 6 on page 117 and says, in the case of Amann:

It is unnecessary to pursue that question in the present case –

that is, the impact of those principles:

since it has not been suggested that the repudiating party (i.e. the Commonwealth) derived or retained any substantial benefit for itself at the expense of the other party . . . It is, however, desirable to keep in mind the importance of the doctrine of restitution or unjust enrichment as the rational basis of significant parts of the common law in determining the content of particular rules in some of the persistently grey areas of the law of damages.

Now, we have not advanced this case on a restitutionary basis, but if one is looking to formulate new rules that do not currently exist about the content of this presumption and the implications it has for innocent plaintiffs who have had their contractual hopes dashed, in our submission, the fact that, by reason of the breach, the party at fault ends up with the asset which is the result of the expenditure is of some significance.

EDELMAN J: I think Justice Deane is possibly contemplating a different type of situation, where the expenditure is obliged expenditure under the contract to which the other party takes the benefit. Your expenditure was not obliged expenditure under the contract.

MR WILLIAMS: It was not, but it was – unlike expenditure in cases like Amann or McRae, it was expenditure that directly benefitted the party who defaulted under the contractual provisions.

BEECH‑JONES J: Mr Williams, you are not mounting a case that you are entitled to a restitution claim based on the fact the Council supposedly took advantage of the breach and bought the hangar for $1?

MR WILLIAMS: I am not. What I am saying is that to the – what I am submitting to your Honours is that to the extent that this Court has in mind formulating new rules that are not currently fashioned in Amann or McRae – my friend is inviting your Honours to; we say your Honours
should not – but to the extent that your Honours take up that implicit invitation, it should not be forgotten what has occurred in this case.

My learned junior raises another possibility of what the two presumptions referred to in Berry might be. It is also possibly speaking about the presumption against wrongdoers, because that was spoken about earlier in the paragraph when dealing with Armory v Delamirie.

If the Court pleases. Unless there is anything we should raise with your Honours, they are our submissions.

GAGELER CJ: Thank you, Mr Williams. Mr Gleeson.

MR GLEESON: Your Honour the Chief Justice this morning asked about page 87, point 4 of Amann, Chief Judge Learned Hand’s statement. We emphasise that the principle there stated was that:

the promisee may recover his outlay in preparation for the performance –

Your Honour asked this afternoon whether it was essential or non‑essential reliance in L. Albert & Son. At page 191, Chief Judge Learned Hand indicated he regarded it as a case of essential reliance. Can I explain why he might have said that?

GAGELER CJ: So, the expenditure, as I understand it there, was expenditure in preparation for receipt of equipment. So, the buyer was not contractually obliged to do it?

MR GLEESON: The buyer, in order to perform the buyer’s obligation, which was to accept delivery, failing which the buyer would be liable in damages, took a necessary step to prepare for delivery.

GAGELER CJ: I see.

MR GLEESON: That is regarded as essential expenditure because, even if not obliged, it is necessary to perform your side of the bargain.

GAGELER CJ: And you give the same explanation for McRae, do you?

MR GLEESON: McRae could either be seen that way or in the second way that Professor McLauchlin describes in volume 5, at page 1192. In the last paragraph he says in every case where the onus has shifted it was either the first category of strict essential reliance:

incurred in performing or preparing to perform obligations assumed under a contract with the defendant and in anticipation of it being recouped from performance by the defendant of its obligations.

Or the second category, where he puts McRae, where it:

was incurred in order to acquire and exploit the property or right that was the subject of a contract with the defendant and from which, if all went well, the expenditure would be directly recouped and profits made.

That is, from the contract with the defendant. So, they are the only two categories where it has been found that the onus has shifted. We would submit we are neither of those and, to illustrate that from the New Zealand decision in Ti Leaf, which is in volume 4 at tab 29, page 1106, paragraph [49], there is first a question whether it is an evidential or a legal burden which is important:

It may be one thing to consider recovery of expenditure incurred in partly performing a contract that is subsequently breached. Then it may be reasonable to require the party in breach to show why the innocent party would not have received from performance of the contract value at least equal to the part performance. It may be quite different, however, where in reliance on a contract expenditure is incurred for a separate and highly speculative venture.

So, we draw attention to that. If your Honours still have Professor McLauchlin’s article, at the top of 1193 he discusses Ti Leaf and explains why the presumption for recoupment was “much weaker”, and then contrasts Ti Leaf with the Yam Seng decision where the presumption was allowed, and what is at the foot of 1193 to 1194 may be illuminating. In that case, the film, where the recoupment was to come from – that is, through the making of the film – was regarded as:

‘a separate and highly speculative venture’. If all had gone well, the company would, in ordinary parlance, say that it made a profit from the film, not the tenancy agreement, whereas in Yam Seng it would say that it made a profit from the distribution agreement.

So, applying the distinction here: if all went well, one might say the respondent made money from conducting its businesses from the premises, but one would not say it made money from the lease. For that reason, this case falls outside each category recognised by Professor McLauchlin.

BEECH-JONES J: Mr Gleeson, what would be – fitting out your restaurant or your café in anticipation of a lease, would that be within the direct expenditure or the essential reliance or incidental?

MR GLEESON: Probably not, your Honour; it would be in the incidental. But it would be a case where the evidentiary onus would shift fairly quickly to show some reason why you would have recouped it from your business. Your Honours, our second proposition in reply is that paragraph 6 of the respondent’s outline states a principle which we submit is too broad for this Court to adopt. Your Honour the Chief Justice raised the problem with creating a presumption in circumstances where it is impossible to prove what would have happened if the contract had been performed; that cannot be an irrebuttable presumption.

So, it really must be a proposition that whenever it is difficult to ascertain what would have happened if the contract had been performed, the legal burden of proof shifts in reliance cases but, we hasten to add, never shifts in the conventional case where the plaintiff is trying to prove loss of a chance or to prove its case on the ordinary balance of probabilities. And that must raise a real question, given that in very many cases following the breach, it is difficult to ascertain precisely what would have happened if the contract had been performed.

Why is this reverse onus as a legal matter – leave aside evidence, which is softer – why is it as a legal matter being reversed? What interest is calling for that differential treatment? We submit a disjunct would be created in the law if you adopted the proposition in paragraph 6 in the case of reliance expenditure when the Court has never adopted that in the case of proof of loss of a chance.

GAGELER CJ: You start in the reliance case with reliance. You start with the plaintiff being out of pocket and unable to proceed to obtain the benefit of the contract being performed because of the breach by the defendant. I mean, it is not like you just start with a blank slate, you start with out-of-pocket expenditure.

MR GLEESON: Now, two rationales have been discussed today. The first is the commercial expectations rationale. That has received little advance from the respondent. Let us put that aside, even though it was, in fact, very crucial to many judges in Amann. What seems to be left is the proposition that if I am out of pocket, in reliance on your promise, plus, following your breach, there are difficulties of whatever character in ascertaining what would have happened. A legal burden of proof is shifted to the defendant, even if one has the type of facts presented by this case.

And that is where the problem arises, your Honours, because if you go back to Justice Brereton at paragraph 135 and 140, what his Honour is there saying, is – 135 and 140 – because I spent my $3.7 million – which I was permitted to do but not obliged to do, and I did it hoping I might make it back out of my separate businesses, but not through transactions with you, and given it is so speculative that one cannot say whether over the 30 years I would have, on the one hand, got it back or, on the other hand, I would have simply made more losses – in those circumstances, I reverse the legal onus. As his Honour has recognised it, it is an impossible burden to discharge, because his Honour has said it is too speculative to know what would have happened, and it is not merely ‑ ‑ ‑

EDELMAN J: If that is ‑ ‑ ‑

MR GLEESON: Sorry, your Honour, could I just finish? It is not merely speculative between zero recoupment and X recoupment. The speculation is between recouping anything and suffering further losses because of your own businesses. Now, that is the real issue before you. Do you, in that case, say the mere fact I have spent it, which generates sympathy legally, is enough to say those impossible speculations on both sides are passed to the defendant?

EDELMAN J: In your example and the way you characterise it, it is going to be – if one accepts the impossibility thesis – impossible for somebody to be able to prove whether loss has been suffered. Why should the plaintiff bear the onus of proving an impossibility that is caused as a result of the defendant’s breach, rather than the defendant bearing the onus arising from that impossibility?

MR GLEESON: The answer is, if we are in the territory where it is so speculative that it is impossible to prove whether it is going to be recouped or, in fact, whether you are going to suffer further losses, and that speculative nature was inherent in the nature of the bargain you entered and the nature of the expenditure you chose to engage in, that was there from the very outset that that was a bargain where you were not to recoup it from us, you were to recoup, if at all, from third parties. So, it was inherent in the bargain, not in the breach, and it was there from the outset, and you cannot even prove as a plaintiff, on the balance of probabilities, that there was a chance of real value that you would get something back. Then fairness and justice does not say we put the impossible burden on the defendant, because that is, in effect, to rewrite the contractual bargain that has been entered.

This is not a bargain where the Council said, we, in any way, guarantee or protect you against your separate businesses. That is why, your Honour, justice and fairness do not require a reversal of onus in the case where it is so speculative one cannot say one way or the other, from the outset, whether anything would ever have been recovered. Another way of saying that is, in this type of case – to come back to your Honour Justice Gleeson’s question this morning, focusing on the breach – the breach has not created this speculative monstrosity. The speculation was inherent in that which was agreed and that which was not taken on as part of the burden of the Council.

EDELMAN J: Is that ultimately, really, to say then that this case falls on the side of the line that is exemplified by aleatory contracts, insurance contracts, where the nature of the contract itself is such that the defendant’s breach will never give rise to the uncertainty in proof of loss, because that uncertainty in proof of loss will always exist?

MR GLEESON: Yes, and to take your Honour’s question this morning, the development here is not the same as the tanker. The tanker in McRae, the Commission promises there is a tanker at that spot, go and spend your money if you wish to perform your contract of purchase. This is not that case. In this case, what was promised at its highest was we will give you 25 nice, fully seweraged lots around your property, over which you will have a lease for 30 years. We accept that that is the effect of the promise.

GORDON J: Is that the submission put below?

MR GLEESON: Yes, your Honour, this was exactly what was put.

GORDON J: That it was an aleatory contract?

MR GLEESON: Not in those terms, but what was put ‑ ‑ ‑

GORDON J: Well, I understood that was the proposition that was just put to you by Justice Edelman.

MR GLEESON: What was put was that the nature ‑ ‑ ‑

GORDON J: The first question was not put in those terms, and worthy of aleatory – there is a whole lot of authorities, which I think you pointed to in a footnote, about aleatory contracts, which we have not been taken to. That is the second point I want to ask, whether they were the subject of debate and discussion. And third, what evidence and factual findings do we have to assess that submission?

MR GLEESON: My answer to Justice Edelman was not that this was an aleatory contract. My answer was that this contract falls into that category as per page 89 of Amann, where it was inherent in this contract from the outset, irrespective of breach, that not the slightest amount of expenditure might be recouped. That was put.

EDELMAN J: And the way you distinguish this case from other cases which are not in that category is, what, because third parties are involved, or because the uncertainty arises for reasons that are independent of the parties themselves?

MR GLEESON: It is the combination of factors. Firstly, third parties are centrally involved in whether anything will ever be recovered. There have to be decisions by 24, or thereabouts, other people, or some lesser number, to take up the beautifully seweraged lots. There have to be decisions by the customers of those other businesses whether they want to take up the custom of those other businesses. Those are matter wholly in the hands of third parties. That is one aspect.

The second aspect is our contract, in the clauses I took you to this morning – 12.3 and 12.4 – says the risk of you making money or not from the business you are going to conduct is yours, not ours. So, that is an allocation of risk point. The third factor is, contrary to Mr Williams’ submissions, whether they were ever going to make a cent depended also upon the respondent’s business decisions and its skill in attracting customers to its business. Now, your Honour Justice Steward asked: was there a business plan? No. What did the cross-examination establish? Everything had failed, and the man had a hope that if it developed, something different would happen.

What was never put forward by the respondent was what were the businesses it was going to conduct once the 25 lots were there and how they would somehow make money when the track record to date was one of failure. So, your Honour Justice Gordon, I have only partially answered your question. What was certainly put, which you will see in Court of Appeal, paragraph 58(1), page 141, was the central distinction between:

expenditure incurred by the plaintiff in preparing for or performing obligations under the contract, with a corresponding expectation of receipt of a benefit under the contract which would allow the plaintiff to at least recoup its expenditure.

It was not submitted this was a pure aleatory contract in the strict meaning of it, because it is not.

GORDON J: Thank you.

MR GLEESON: But what it does is share the relevant underlying similarity of feature with that which is identified at page 89 of Amann. Your Honours, how we submit, then, the case ought to have been concluded is that her Honour – contrary to the attack this afternoon upon us, which is fair enough, but upon her Honour unjustified – did not address the wrong counterfactual.

If you could go, please, to page 68 of the core appeal book, at 211, her Honour was quite precise in identifying that the counterfactual was the plaintiff would have had the 30‑year lease and, secondly, this is lines 4 to 6, the other lots in the subdivision would have been registered. It was because her Honour was focusing on that correct counterfactual she then made the finding of fact, the evidence, such as it was, showed there was very little demand at the location. There was little interest beyond the plaintiff’s in developing the airport.

Now, Mr Williams says he overturned that finding at Court of Appeal 134, and he referred to the Council documents. What you will see in those Council documents is no evidence of anyone wanting to take up one of the other 24 proposed lots. The highest it got was in the first document, where 12 people expressed interest in renting little pigeonholes in this hangar if it was retrofitted. So, nothing in those documents showed her Honour erred in that finding. She is focusing on the correct counterfactual.

Paragraph 212, Mr Williams says, is irrelevant. It may not be conclusive, but it is hard to think of something more relevant to say you had the opportunity to conduct businesses on the very site and build good will, and you failed. That is not conclusive, but what that at least does, we would submit, is raise a question where the onus, evidentiary‑wise, would shift back to the plaintiff to answer these questions: how were you planning to do better in the future than you had done in the past? Question 1. Question 2: how were you planning to survive the lean period in the hope that other people might take up the new 24 other seweraged lots? How were you planning to do that? Number three: what was your business plan, including your finance, to take you through into a stage where you might, at some point, recover profits?

Now, all those were matters that lay in their knowledge and their responsibility, and the evidentiary onus called upon them in this case to answer them, and they never did. They could not. So, you add the factors in 212 together with – I emphasise – 213. Her Honour did look at the correct counterfactual and she made a finding:

The possibility that the plaintiff might have been in a better position to make money . . . had the development . . . proceeded as originally envisaged (with the lots fully occupied by profitable business) is no more than speculative.

That finding is, effectively, accepted by Justice Brereton at paragraph 135 and 140.

BEECH‑JONES J: Mr Gleeson, could I ask you something when you have a moment. You say those findings and what Justice Brereton found are good enough to rebut the evidentiary onus?

MR GLEESON: Yes.

BEECH‑JONES J: And do you accept the converse, that they are not good enough to rebut the legal onus?

MR GLEESON: I do not accept that, for this reason: her Honour, at 221 – which we have never retreated from – depending how your Honour reads it, says:

the defendant has discharged the onus of rebutting it by showing that the cost of the hangar would not have been recouped.

What we read her Honour as saying is if you have to make a single finding on the balance of probabilities as to a past hypothetical event, when you look at this entire sorry history – including what we led, and including what they never they answered – if you have to do it on a single‑point answer, the answer is no recoupment is more likely than any recoupment.

May it please the Court.

GAGELER CJ: Thank you, Mr Gleeson. The Court will reserve its decision in this matter and will adjourn until 10.00 am tomorrow.

AT 4.14 PM THE MATTER WAS ADJOURNED