---

CONTRACTUAL DISPUTES

Scenarios

Contractual disputes arise where a party fails to perform their obligations pursuant to the express or implied terms of an agreement or are in breach of their statutory obligations under the Fair Trading Act, Contracts Review Act or other similar legislation.

The following types of agreements are regularly disputed: partnership, joint venture, franchise, agency, lease, service, terms of trade, sale of business or share, loan, distribution and employment.

Some agreements have penalty clauses which provide for compensation in the event of a breach by a party; however the validity of these clauses is often challenged.

How are damages quantified?

In contractual disputes, the plaintiff is entitled to be placed in the position they would have occupied had the agreement been performed as agreed. However they are not entitled to be placed in a position superior to that which they would have been in had the contract been performed.

Depending upon the type of contract and the breach in issue, damages are generally quantified under two main heads:

1. General Damages - Those losses that are a natural and probable or are reasonably contemplated result of the breach (subject to principles of remoteness).

• They are usually made up of three components:
  
  1. The amount expended by the plaintiff in performing or preparing to perform the contract prior to breach (Reliance damages - wasted expenditure);
  2. The further amount which the plaintiff would have had to expend to perform the contract; and
  3. The amount of profit or loss that would have eventuated if the contract was performed (Expectation damages)
  If there is a market for the goods and service, the plaintiff's loss equals the price to buy a substitute item or alternatively the price for substitute performance in the market less the agreed contract price.
  

• Expenses incurred as a direct consequence of the breach - e.g. additional staff, hire equipment, cost of reinstatement
  
• Loss of chance - what alternative benefits/opportunities has the plaintiff lost eg loss of customers or repeat orders
  
• Loss of reputation and goodwill - is awarded in exceptional circumstances if the breach injures the plaintiffs reputation
  

2. Special Damages - Those losses that are actually within the contemplation of the parties when the contract was formed (Did the plaintiff notify the defendant of the special circumstances?)

As the quantification of damages involves questions of law and fact unique to each matter, at the commencement of each retainer Troy Peisley likes to meet with both counsel and the instructing solicitor. The objective is to settle on the terms of reference, address what assumptions, if at all any, are to be made (Eg what losses, if at all any, were within the contemplation of the parties at the time the contract was formed?) and detail what records are required to quantify the damages. If insufficient records are available it may be necessary to issue notices of discovery or subpoenas to produce.

Top of Page

---

TORTIOUS DISPUTES (Negligence)

Scenarios

Negligence claims arise where a party under a duty of care, breaches that duty by causing physical damage to a person or their property. Issues invariably arise as to whether a party is too remote to be owed a duty of care or whether the damage is of a kind that is reasonably foreseeable.

The damaged party is under a duty to mitigate their loss and issues frequently arise where the plaintiff fails to mitigate their loss due to their own impecuniosity.

Defendants look to limit a plaintiff's claim on the basis of voluntary assumption of risk, contributory negligence and intervening events.

How are damages quantified?

In tort, damages are awarded to place the plaintiff in the position they would have occupied but for the tort complained of.

Damages are subsequently quantified under two heads:

1. Normal Damages

• Material Loss e.g. cost to repair or replace damaged property
  

2. Consequential Loss

• They are usually made up of four components:
  
  1. Loss of profit;
  2. Expenses caused by tort (e.g. additional staff costs, removing debris, security, leasing alternate premises, hire equipment);
     
  3. Costs savings (e.g. rent abatement); and
  4. Interest (pursuant to court rules, from date action arose without compounding)

• Loss of Opportunity - what is the degree of probability of an event occurring?

• Loss of Earnings Capacity - loss of capacity to earn income, rather than actual loss of income

Consideration needs to be given to assessing past loss (that is loss from the date of damage until the date of judgement) and future loss (that is loss from the date of judgement until the date the plaintiff is no longer affected by the damage that is discounted and adjusted for any relevant vicissitudes).

As the quantification of damages involves questions of law and fact unique to each matter, at the commencement of each retainer Troy Peisley likes to meet with both counsel and the instructing solicitor. The objective is to settle on the terms of reference, address what assumptions, if at all any, are to be made and detail what records are required to quantify the damages. If insufficient records are available it may be necessary to issue notices of discovery or subpoenas to produce.

Top of Page

---

EQUITY DISPUTES (Negligence)

Scenarios

If a person is in a position of trust or is entrusted to hold, control or manage property for the benefit of another they will owe a fiduciary duty to those persons on whose benefit they act. The trustee has numerous fiduciary obligations, such as to avoid any conflict of interests, not to profit at a beneficiary's expense, to make available all relevant information to a beneficiary and to avoid using any information obtained for their own private advantage.

How are damages quantified?

Before quantifying damages one needs to identify whether the defendants breach is grounded in equity's exclusive jurisdiction or whether the breach is in both equity and common law.

If a defendant breaches their fiduciary duty or breaches a trust, then this is within the exclusive jurisdiction of equity and equitable remedies such as compensation or an account of profit may be claimed, subject to discretionary considerations of conscience, fairness, hardship, laches and acquiescence. The common law doctrines of remoteness and foreseeability of damage do not apply.

If a defendant breaches the term of an agreement or infringes a trade mark, then this is within equities concurrent and auxiliary jurisdiction, which means that pursuant to the statutory equivalent of the Lord Cairns' Act, equitable damages may only be awarded in addition to or in substitute of an injunction or an order of specific performance. Therefore an account of profit may only be awarded if a party has been awarded an injunction or an order of specific performance. Damages will be assessed in accordance with common law principles as equity follows the common law, however damages may be reduced due to discretionary considerations and even if there are no damages suffered at common law damages may still be provided.

The following are some of the general propositions that apply when performing an account of profit:

1. A fiduciary is not required to account for more than what they received from the breach;
   
2. If a fiduciary has acted without dishonesty, they may be allowed to deduct their remuneration from the profit;
   
3. If a trustee's profit comes from misapplying trust monies, the beneficiaries are entitled to the entire profit;
   
4. If a trustee's profit comes from misapplying trust monies mixed with other money, the beneficiaries are entitled to a proportionate share of the profit;
   
5. If a property is purchased by misapplying trust monies, the trustee may be ordered to sell the property and account for the profit; and
   
6. If a fiduciary purchases and operates a business in breach of their duty, the fiduciary should either account for:
   
1. any benefits that flowed to them in breach of their duty; or
2. all businesses profits less an allowance for their remuneration.

As the quantification of damages involves questions of law and fact unique to each matter, at the commencement of each retainer Troy Peisley likes to meet with both counsel and the instructing solicitor. The objective is to settle on the terms of reference, address what assumptions, if at all any, are to be made and detail what records are required to quantify the damages. If insufficient records are available it may be necessary to issue notices of discovery or subpoenas to produce.

Top of Page

---

CORPORATION ACT DISPUTES

Scenarios

The Corporations Act 2001 (Cth) creates numerous obligations on directors in the performance of their duties and provides remedies for shareholders in the event the company acts contrary to the interests of its members. Additionally, issues frequently arise as to the disclosure of information regarding the company's financial performance and whether the financial statements are true and fair and prepared in accordance with the accounting standards.

How are damages quantified?

The statutory remedies available to parties under the Corporations Act depends upon what provision of the Act are invoked.

If the dispute involves a claim of oppression against shareholders then the court may make an order for the purchase of shares. In which case a share valuation is performed. The following represent some of the methodologies used to value a company's shares:

• Earnings Methods:
  
  • Capitalisation of Future Maintainable Profits
    
  • Discounted Cash Flows
    
• Net Assets Methods:
  
  • Going Concern
    
  • Realisation of Assets or Liquidation Value
    
  • Dividend Capitalisation Method
    
  • An adjustment may need to be made for minority shareholders
    

Alternatively a party may claim that a director is in breach of their statutory duties under the Corporations Act (e.g. failing to disclose material personal interest). If so, then there are two important elements to supporting or limiting their claim. Firstly, discovering evidence that supports or refutes the claim and secondly quantifying the extent of the breach, if at all any. Parties may also include in their prayers a claim that the director breached their fiduciary duty in which case they usually also seek an account of profit.

As the quantification of damages involves questions of law and fact unique to each matter, at the commencement of each retainer Troy Peisley likes to meet with both counsel and the instructing solicitor. The objective is to settle on the terms of reference, address what assumptions, if at all any, are to be made and detail what records are required to quantify the damages. If insufficient records are available it may be necessary to issue notices of discovery or subpoenas to produce.

Top of Page

---

INTELLECTUAL PROPERTY DISPUTES

Scenarios

If a party's copyright or registered design, patent or trademark is infringed then under the respective statutory provisions the plaintiff may be entitled to an account of profit. A trade mark is infringed if a mark is used that is substantially identical or deceptively similar to the registered mark.

Alternatively a dispute may arise if:

• a competitor seeks to pass off on a company's reputation, or
• in breach of an agreement an individual breaches their duty of confidentiality, a trade secret or covenant; or
• a party is not paid in accordance with the terms of a royalty agreement.

In the first instance the plaintiff will generally seek an interlocutory injunction preventing any further continuance of the infringing act until the final hearing. At this stage the registered party usually seeks to protect their interests by seeking an Anton Piller Injunction to recover infringing goods and discovery to access information that will be critical in quantifying the damages. The final hearing is usually split in two, with liability being determined and, if proven, then the court will refer the matter to a Master to assess quantum.

The onus is on the plaintiff seeking damages to prove actual harm (ie loss of sales) caused by the infringement. Therefore sales prior to the commencement of the infringing act need to be compared with sales after, whilst also considering other factors such as competitor's actions, industry performance and the economy.

How are damages quantified?

In general a successful applicant is entitled to make an election to either claim common law damages or seek an account of profit.

Each option usually yields different results therefore in deciding which option to elect it is prudent to quantify each option and select the one which is the most favourable.

1. Common Law Damages - If selected then the loss is assessed by reference to the loss suffered by the applicant as a result of the infringement.

The following heads of damages may be claimable:

• Expenses that are a direct consequence of breach - additional staff, hire equipment

• Loss of profit - determine loss of sales as the difference between sales before and after the commencement of the infringing acts. Deduct from the sales the direct costs associated and overheads.
  
  OR
  
  
• Reasonable Royalty - where loss of profit cannot be established then the loss is measured by reference to what a reasonable royalty would be in the market

• Price Erosion - if establish that prices would have been higher but for the defendants infringing

• Corrective Advertising - the plaintiffs actual or projected costs to restore the value of its trade mark

• Loss of Reputation - where goodwill is damaged due to disparaging advertising or marketing of an inferior product under an infringing mark (brand dilution)

• Loss of Sales / Customer Numbers

• Loss of ability to extend brand - seek expert marketing opinion, diversion of trade

2. Account of Profit - If selected then the loss is assessed by reference to the profits made by the infringer. The infringing party is required to disgorge their ill-gotten gains ie transfer profits from illegal acts to rightful owner.

The defendants profit is generally measured by applying the following steps:

• Apportion gross sales between those that represent sales from infringing verse non infringing goods or services; and

• Deduct direct expenses incurred in making the infringing goods (eg cost of goods sold, wages and direct costs) and overhead expenses if the infringer would have incurred the overheads on selling alternate products.

As the quantification of damages involves questions of law and fact unique to each matter, at the commencement of each retainer Troy Peisley likes to meet with both counsel and the instructing solicitor. The objective is to settle on the terms of reference, address what assumptions, if at all any, are to be made and detail what records are required to quantify the damages. If insufficient records are available it may be necessary to issue notices of discovery or subpoenas to produce.

Top of Page

---

TRADE PRACTICES BREACHES

Scenarios

A consumer may be entitled to claim damages under s.82 of the Trade Practices Act 1974 (Cth) if a company breaches:

1. the 'Restrictive Trade Practices' provisions under Part IV, by engaging in:

• Anti-competitive Agreements that substantially lessen competition
  
• Misuse market power through predatory pricing, refusing to deal, oppressive conduct
  
• Exclusive Dealings- solus agreement, tying, restraints, third line forcing
  
• Resale Price Maintenance
  
• Secondary boycotts
  
• Price Discrimination
  
• Acquisitions that substantially lessen competition in a market

2. the 'Unconscionable Conduct' provisions under Part IVA, by engaging in unconscionable conduct. Note s.51AC is available to business consumers as opposed to consumers per se.

3. the 'Industry Codes' provisions under Part IVB, by engaging in conduct that contravenes an applicable industry code eg franchising code

4. the 'Consumer Protection' provisions under Part V, by engaging in:

• Misleading or deceptive conduct (note the plaintiff must show reliance on the misrepresentation)
  
• False or misleading representations
• Certain misleading conduct in relation to services
• Bait advertising
• Referral selling
• Harassment and coercion
• The manufacture or importation of defective goods
• Implied undertakings as to quality or fitness

Similar legislation may apply in each state.

How are damages quantified?

The TPA specifies the available statutory remedies i.e. injunctions, divestiture, damages, variation of contracts, corrective advertisements etc.

In quantifying the statutory damages, a consumer may recover their loss or damage suffered provided the loss suffered was caused by the conduct of a person in breach of the TPA's restrictive trade practices provisions, unconscionable conduct provisions, industry codes or consumer protection provisions: s.82 and s.87.

Additionally, applicants are attempting to maximise their claims by adding other heads of damages to their claim, such as those awarded in common law contract, torts and in equity. Subsequently Australian courts are determining whether the measure of statutory damages in TPA matters is analogous to the measure used in contracts or torts.

It is said the courts will seek to place the applicant, so far as money can, in the position they would have occupied had the wrong not been committed. Subject to the limiting factors of remoteness, mitigation and contributory negligence.

Whilst this suggests the courts may adopt the tortious measure of damages as opposed to the contractual measure (expectation damages), the high court has said it is not constrained by either the contractual or tortious analogy's.

In general, the applicant may be entitled to:

• The tortious heads of damages as referred to under Tortious Disputes
  
  OR
• Loss suffered - How much worse off is the applicant? - compare their position after the contravening act with their position before the contravening act.

• Loss of Chance - what alternative benefits/opportunities has the applicant lost. Look at the degree of probability of an event occurring.

• Injury to Reputation and Goodwill - if the respondents actions resemble defamation or passing off

• Consequential losses:
  • Cost of borrowing money or terminating investments
    
  • Losses that flow directly from the applicants reliance on the misrepresentation, at least if the loss is foreseeable;
    
  • Losses that result from the applicants being "locked into" the losing venture such as trading losses, as long as those losses are not caused by matters such as the applicant's own misguided management decisions.

As the quantification of damages involves questions of law and fact unique to each matter, at the commencement of each retainer Troy Peisley likes to meet with both counsel and the instructing solicitor. The objective is to settle on the terms of reference, address what assumptions, if at all any, are to be made and detail what records are required to quantify the damages. If insufficient records are available it may be necessary to issue notices of discovery or subpoenas to produce.

Top of Page

---

FINANCE DISPUTES

Scenarios

There are many types of debt and equity finance that are used to leverage growth:

• Debt - Debentures, Overdraft, Factoring, Financial Leases, Operating Leases, Commercial Bills, Loans and Bridging Finance. Lenders secure their debt through guarantees and by registering a charge over the asset.

• Equity - Shareholders, Venture Capital, Business Angels and public listing.

Disputes invariably arise because a party claims the other breached a term of the finance agreement. Issues arise as to whether a party was in fact in breach of the agreement and the quantum of the breach.

How are damages quantified? If a dispute arises under the terms of a finance agreement the damages may be measured by reference to several areas of law.

• Contractual Law
  
• Trade Practices Law
  
• Consumer Credit Law

Please refer to the discussion under these headings.

As the quantification of damages involves questions of law and fact unique to each matter, at the commencement of each retainer Troy Peisley will request to meet with both counsel and the instructing solicitor. The objective is to settle on the terms of reference, address what assumptions, if at all any, are to be made and detail what records are required to quantify the damages. If insufficient records are available it may be necessary to issue notices of discovery or subpoenas to produce.

Top of Page

---

TAXATION DISPUTES

For whatever reason, a taxpayer may fail to comply with their obligations to remit income tax, capital gains tax, fringe benefits tax and goods and services tax to the ATO or stamp duty or payroll tax to the Office of State Revenue.

Even though taxation in Australia is a self assessing regime, taxpayers are frequently audited. Whilst an audit by the ATO is significantly more vigilant in determining whether a tax payer complied with the taxation legislation compared to a tax agent, the ATO's amended assessments and penalties are sometimes incorrect.

If your client has been issued with an amended assessment and wishes to submit an objection or defend a claim brought against them by the ATO it may be beneficial to consider speaking with us to independently assess whether the ATO has determined their tax liability correctly.

Top of Page

---

FAMILY LAW DISPUTES

In family law disputes parties are required to give evidence to the Family Court about their assets, liabilities, income and expenditure. Each party will file a Form 17 - Financial Statement in respect of their financial matters.

The Form 17 - Financial Statement is the starting point by which parties may seek to retain an expert accountant to:

• Value company shares, trusts, partnerships and businesses
  
• Analyse past financial records for evidence of undisclosed transactions or hidden assets
  
• Identify assets acquired during the marriage and outside the marriage
  
• Identify what resources a spouse may have available to finance a settlement and suggest ways to raise funds for a clean break settlement
  
• Prepare and review detailed budgets of expenditure
  
• Evaluate tax implications of proposed settlements
  
• Assist compile financial evidence
  
• Provide expert testimony in support of conclusions reached
  
• Attend Experts' Conference pursuant to O 30A r 9

As the above indicates there are numerous tasks that Troy Peisley can assist your clients with. As each matter involves unique questions of law and fact, at the commencement of each retainer Troy Peisley likes to meet with both counsel and the instructing solicitor. The objective is to settle on the terms of reference, address what assumptions, if at all any, are to be made and detail what records are required to quantify the damages. If insufficient records are available it may be necessary to issue notices of discovery or subpoenas to produce.

Top of Page

---

INVESTIGATIVE ACCOUNTING

Adequately particularising claims

Under the Supreme Court rules of some states, allegations of fraud, misrepresentation, breach of trust, wilful default and undue influence are serious matters and plaintiffs are required to properly plead and particularise their claims against a defendant in the originating process. E.g. Part 16 Rule 2, of the Supreme Court Rules 1970(NSW).

In most matters, defendants will typically engage in delay tactics by requesting the plaintiff to provide further and better particulars in support of their claim.

In order to avoid this inconvenience and to establish the strength of your client's case it is prudent for your client to retain an expert like Troy Peisley to discover what financial evidence exists to support or refute your client's claims of fraud or misrepresentation. If satisfactory, this evidence may then be pleaded in the particulars of the statement of claim.

Evidence supporting or refuting liability

Troy Peisley will be helpful in providing opinion evidence that goes to proving or rebutting liability.

In negligence, IP infringement and some trade practices matters the plaintiff needs to prove the damage caused the loss suffered. Therefore showing a correlation between the negligent act or infringing act and the loss in sales is valuable evidence.

Alternatively evidence may be discovered that indicates the loss suffered was due to a supervening event. This is particularly relevant where a business derives the majority of its income from a few customers and prior to the plaintiff's cause of action occurring their major customer terminated its agreement with the plaintiff.

As each matter involves unique questions of law and fact, at the commencement of each retainer Troy Peisley likes to meet with both counsel and the instructing solicitor. The objective is to settle on the terms of reference, address what assumptions, if at all any, are to be made and detail what records are required to quantify the damages. If insufficient records are available it may be necessary to issue notices of discovery or subpoenas to produce.

Top of Page

---

LITIGATION SUPPORT

Troy Peisley has been admitted as a solicitor since 1996 and has had carriage of numerous commercial matters in the Supreme Court and District Court of New South Wales.

As a consulting accounting expert Troy can assist strengthen a client's case by working as a part of a team with counsel and his instructing solicitors to, amongst other things:

• Assess the financial worth of defendants
  
• Assist with Anton Piller Injunctions
  
• Security for costs applications and Mareva Injunctions
  
• Assist in drafting notices to produce, subpoenas, interrogatories, notices to admit and affidavits
  
• Attend on discovery of evidence and reviewing subpoenaed documents
  
• Attend Negotiation Conferences and Mediation
  
• Advise on the effect of interest on damages
  
• Evaluate tax implications of proposed settlements

Top of Page

---

INSURANCE CLAIMS

Scenarios

Troy Peisley can assist insurers and insured party's quantify:

• Business Interruption
  
• Inventory Loss Claims
  
• Professional Indemnity
  
• Product Liability
  
• Directors Liability
  

As a Chartered Accountant and Solicitor, Troy is proficient at:

• interpreting the terms of an insurance policy;
  
• preparing claims in accordance with the terms of the insurance policy;
  
• assessing whether the claim was prepared in accordance with the terms of the insurance policy;
  
• ascertaining whether the business records are adequate and accurate; and
  
• confirming the existence of the amounts claimed.

Unfortunately most insured businesses are unaware that under their insurance policy they can claim the costs of retaining an accountant to assist in the quantification of their claim. Subsequently they fail to maximise their claim and ignorantly accept the assessment prepared by the insurer or their loss assessor.

How are insurance claims quantified?

Business interruption claims and inventory Loss claims are generally quantified as follows.

Business interruption claims

A business interruption claim arises where the business has been affected due to fire, burglary or water damage.

In general the insured's business records are examined to calculate the loss of gross profit which is generally calculated as the reduction in turnover (or gross rentals) during the indemnity period, along with the increased costs of working to mitigate the reduction in turnover due to the damage. This is generally referred to as the consequential loss. If the insured's records are not sufficiently supported by adequate records their claim will be adversely affected.

In addition the insured may also seek to quantify the material loss suffered that is costs to replace shop fixtures, shop fittings, office furniture and equipment, stock, personal property and provide temporary protection, temporary repairs and rubbish removal.

Inventory Loss Claims

An inventory loss claim arises where inventory has disappeared because of theft or destroyed because of fire or water damage.

We may be engaged to confirm and measure inventory loss claims. We do this by applying forensic accounting techniques to confirm the existence and values of the covered items.

We review inventory records to develop an inventory dollar value roll in an attempt to confirm loss amounts or develop a specific item roll by tracking units of inventory in and out of the insured's business over time. These and other techniques for confirming a loss are dependent, of course, on the type, completeness and quality of the records maintained.

We are cautious having previously seen fabricated invoices and accounting documents presented to exaggerate an inventory loss. So our review includes an inspection of supporting documents with a critical eye. We also look for accounting aberrations -usually prepared after a loss event occurred and aimed at suggesting a higher than warranted loss amount.

Top of Page