Ah I should clarify that I personally don't believe the damages in question are compensatory damages (I think it's disgorgement of profit) - but I do think that the court thinks they are compensatory damages...! Does that make sense?

------------------------------------------
Dr Katy Barnett
Lecturer
Melbourne Law School
The University of Melbourne
Parkville 3010 Victoria
AUSTRALIA

+61 3 9035 4699



-----Original Message-----
From: Martin Hogg [mailto:mhogg@staffmail.ed.ac.uk]
Sent: Tue 3/8/2011 21:44
To: 'Gregory C. Keating'; 'Robert Stevens'
Cc: Katy Eloise Barnett; Jeannie Marie Paterson; 'Chaim Saiman'; 'Nick Ferrett'; 'Russell Brown'; 'Stephen Pitel'; obligations@uwo.ca
Subject: RE: ODG: Measure of Damages - Tort and Contract


Smith v Landstar is the sort of case which demonstrates that trying to force
all of our attention in matters of remedial entitlement in contract on to
damages is a bad idea. Someone agrees to lend money at interest on the
condition of a security being given. They ought to ensure that that security
is given by the borrower before they lend. If, foolishly, they lend anyway,
then they have a custom-made remedy to get their security: they can ask a
court to force the borrower to grant the security. Given the usual way in
which damages are measured, this should be just the sort of case where a
court would grant a performance remedy, as damages would not adequately
compensate the claimant for any likely loss should such arise (at least not
if damages are assessed on the plaintiff's loss). However, our feckless
lender does neither of these things, but simply waits until the loan is
repaid in full with interest and then decides that, having made the profit
they hoped for but not the greater profit they could have got under a more
lucrative  bargain which they did not make, they want to sue for breach of
contract. The court here awards them damages even though they have suffered
no loss (at least no loss assessed by their being worse off financially).
The defendant has simply gained by being better off than they would have
been had they had to borrow money under a different sort of contract (an
unsecured loan). Because of the inordinate over-emphasis upon damages as the
primary remedy in contract cases, we are forced to try and find some damages
solution to this problem, and so have to concoct a measure which strips the
defendant of a gain even though there is no corresponding loss. I believe
such developments are distorting contract law, and allowing the rationale of
unjustified enrichment to encroach in to an area where contract should
provide the proper answer - and indeed does, through specific performance.
Katy's valiant attempt to convince me that this *is* in fact a case about
compensatory damages I don't find persuasive: "compensating" someone for not
entering a better contract which they might have stretches the idea of
compensation beyond limits it can reasonably bear. Damages must be tied to
the counterfactual position one would have been in had THIS contract been
performed, not some other contract.

As an aside, I am not convinced that some of the examples commonly advanced
to show that damages are not about consequential loss actually prove what
they are claimed to. Robert mentions Grade A and Grade B apples, saying that
"It does not matter that Grade B apples are perfectly good for my purposes
so that I suffer no loss". Yet products made from Grade A ingredients can
command a higher value than those made from Grade B ingredients, as a look
at the shelves of any supermarket will demonstrate (organic fruit juice
costs more than non-organic; orange juice from pressed oranges costs more
than that made from concentrate; and so forth). The fact that I may not
*feel* I have suffered a loss is irrelevant to whether an objective
difference in value can be accorded to the two grades of product or what can
be done with them. I would make a similar point about the example I have
heard Robert mention before of the platinum wedding ring that turns out not
be platinum: the fact that the owner does not feel he has suffered a loss,
because the ownership of the poorer quality ring gives rise to an enjoyable
tale and the ring has sentimental value attached to it anyway, does not
detract from the fact that a platinum ring has an objective value much
higher to that of a merely platinum coloured ring made from something else.
The courts should be entitled to recognise such objective value when
assessing damages, even if some phlegmatic claimants may be willing to put
up with skimped performance. Besides, as I said earlier, the primary remedy
for addressing not getting what you bargained for should - where possible -
be enforcement. If one chooses not to use that remedy, then trying to use
damages to get more than you would have had the defendant performed seems to
me an impermissible attempt to corrupt the fundamental primary principle of
damages.

Still, whatever one's view of it, this is a great case to discuss with
students.

Martin


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