Principal Properties Pty Ltd v Brisbane Broncos Leagues Club Limited [2017] QCA 254

BRISBANE BRONCOS LEAGUES CLUB Limited feels the pain of another loss this year. But this time, not on the field, but in the Court of Appeal.

LAST WEEK, the Queensland Court of Appeal overturned a decision of the Supreme Court and awarded damages for loss of commercial opportunity, when there was only slim chance of a profit.

The case provides timely guidance about how to measure the value of a commercial opportunity.  It is a warning to anyone advising about performance of a development contract or call option as the repudiating party might be liable to pay damages, even if there was only a slight chance the other party would make a profit.


The case involved a Call Option Deed for Principal Properties (the Appellant) to buy land off the Brisbane Broncos Leagues Club (the Respondent) within 3 years for $1 million. This option to purchase was contingent on the Appellant obtaining a development permit for the planned construction on the land. It was found at first instance, and not challenged on appeal, that the Respondent had repudiated the contract entitling the Appellant to terminate. The issue on appeal was contained to the question of damages alone.

At First Instance

Justice Jackson of the Supreme Court found that it was more probable than not that the Appellant would have lost money from the development.   His Honour held that the natural consequence was, as a matter of law, that there was no compensable loss. Controversially, His Honour awarded only nominal damages of $100.

The Appellant appealed on this particular question of law.

On Appeal

With a leading judgment written by Philip McMurdo JA, the Court of Appeal concluded that the opportunity to develop land at a profit, which was denied by the Respondent’s repudiation of the contract, had a value. The Court held, contrary to the Trial Judge, that the methodology found in Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 was relevant for quantifying the value of said opportunity.

Damages for a Lost Opportunity

In agreeance with the Trial Judge, McMurdo JA noted (at [11]) that the Appellant had to prove, on the balance of probabilities, that it had suffered a loss. It also had to prove that its lost opportunity had some value. Once proved, it would then be necessary to assess what that value was.  This required a consideration of the possible impediments to the derivation of the profit which the Appellant claimed would have resulted. See [12]-[13] for a more in depth outline of the steps for advancing a claim for damages for a lost opportunity.

Where the Trial Judge and Court of Appeal differed was in the assessment of whether this opportunity was one of value.

Was this lost opportunity valuable?

The Trial Judge distinguished the present case from that of Chaplin v Hicks [1911] 2 KB 786 and the mining exploration industry, which His Honour thought more appropriate for the Sellars methodology. His Honour noted that in those instances there were two possible outcomes: (1) profit, or (2) not profit but suffer no loss.

The Trial Judge saw the problem (at [126]) with applying the Sellars methodology to cases such as the present as being:

‘… a plaintiff who was more likely to have made a loss than a profit would be compensated by receiving a percentage of the possible profits, while the losses that were more likely would be left out of account.’

This led the Trial Judge to conclude (at [149]) as follows:

‘In my view, under the Sellars methodology, where the postulated loss of a valuable commercial opportunity is the opportunity to engage in a business that might have made a profit or a loss, the category of loss or head of damage should only be recognised as compensable because it is concluded on the balance of probabilities that it had some value, either because it was marketable, or because if the contract had been performed the plaintiff would have been more likely to have made a profit than a loss.’

The Court of Appeal disagreed with the Trial Judge’s decision to distinguish the present case. McMurdo JA noted (at [21]) that the relevant opportunity in this case was the opportunity to make a profit. His Honour further noted that, consistent with the Trial Judge’s findings, there was a more than negligible chance that the Appellant would have made a profit.

In determining, then, whether a commercial opportunity for profit is valuable, McMurdo JA made the following comments (at [23]-[24]):

‘If a commercial opportunity has no change of being profitable, it is an opportunity of no value and its loss could not be compensable. I would also accept that a commercial opportunity which no rational investor would pursue, having regard to the relative probabilities of a profit and a loss and the likely magnitude of each, would be a valueless opportunity.

However, I do not accept that the same may be said whenever it is more likely than not that the pursuit of the opportunity would have resulted in an investor’s loss.’

McMurdo JA further disagreed with the Trial Judge’s choice to distinguish the present case from that of the mining exploration industry, on the basis that the Appellant’s opportunity could not be traded.

In justifying this disagreement, McMurdo JA looked to comments made by Vaughan Williams LJ in Chaplin v Hicks where it was noted that even if the opportunity had no market to be traded on, a jury might well recognise that if a market did exist this opportunity would have been of such value that everyone would recognise that a good price could be obtained for it.

Ultimately, McMurdo JA summarised his conclusions (at [28]):

‘A likelihood that this would have been a loss making development did not, as a matter of law, preclude the award of more than nominal damages. The question is whether the opportunity to profit from this development had a value that was possible although a developer’s loss was more likely than a profit. If it did have a value, there was a compensable loss and the extent of that loss would have to be assessed.’

How the Court of Appeal quantified damages

Following the determination of the relevant legal test, the Court of Appeal went on to consider several challenges made by the Appellant to relevant findings of fact made by the Trial Judge.

In assessing damages to order, the Court of Appeal worked from a $4,000,000 potential profit.  This was based upon the Appellant’s expert evidence, which was largely accepted by the Trial Judge except for a figure for management rights which was reduced by $1.2 million.  The Court of Appeal decided the management rights amount should only be reduced by $500,000.

Applying Malec v Hutton (1990) 169 CLR 638, this figure had to be discounted to account for the various possibilities that could have prevented this profit from being derived in the first place. It was therefore discounted to allow for a 50% chance that a complying development permit would not be obtained, a 50% chance the land would not have been acquired, and the 60% chance that the required pre-sales would not have been reached at the proposed prices. This analysis produced an overall possibility of 10% of the adjusted profit amount, before discounting for any other risks including the financing and sales risk.

In terms of financing risk, there was a 30% chance that development finance would not be obtained. The Court noted that some allowance must also be made for the relatively small prospect that the project would have resulted in an overall loss.

However, a Court found (at [113]) that a project with a 10% chance of a profit of $4,000,000 but no risk of a substantial loss would be a more valuable opportunity than the present one (of a repudiated contract).

This ultimately led the Court of Appeal to order that the Respondent pay to the Appellant the sum of $250,000, with interest of $62,307.37 – a significant difference from the $100 ordered at first instance.

To access the Court of Appeal’s decision follow this link –

Key Words

  • Lost Opportunity
  • Damages
  • Relevant Legal Test
  • Quantification of Damages
  • Valuation of an Opportunity
  • Sellars v Adelaide Petroleum NL (1994) 179 CLR 332
  • Court of Appeal
  • Brisbane Broncos