From: Katy Barnett <k.barnett@unimelb.edu.au>
To: obligations@uwo.ca
Date: 03/11/2020 00:19:06
Subject: New mesne profits case

Dear all,

Members of this list might be interested to know that the New South Wales Court of Appeal has just handed down a new mesne profits case, Sydney Local Health District v Macquarie International Health Clinic Pty Ltd [2020] NSWCA 274, available here: http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/nsw/NSWCA//2020/274.html

The facts are relatively simple. Sydney Local Health District (SLDH) and Macquarie International Health Clinic Pty Ltd (Macquarie) entered into an agreement to build a private hospital and a carpark. However, SLDH purported to terminate the Construction Deed, the Car Park Sublease and the Hospital Lease, and re-entered and took possession of the Hospital Site and the Car Park Site. At this point, only part of the car park had been constructed, and there was no hospital at all. It was common ground that SLDH committed trespass when it took possession. The question was how the mesne profits should be calculated. The trial judge had awarded generous damages on the basis of the rental which might have been obtained in the hypothetical event that the hospital and carpark had been completed. 

The New South Wales Court of Appeal said that this was wrong, and that the user fee reflected the actual use of the land, not the prospective use. I found the discussion of the nature of damages for trespass from [69] onwards very useful. At [82] the court notes the difficulty in characterising mesne profits:

Various judicial views have been expressed on that question. Thus there are those who consider damages for mesne profits:

(i) as plainly restitutionary in character (see, for example, Hoffman LJ in Ashman at 519 who said the time had come to “call a spade a spade”);

(ii) as having something of a hybrid character (see, for example, Inverugie Investments Ltd v Hackett [1995] 1 WLR 713 at 718 (Inverugie) per Lord Lloyd: “The [user] principle need not be characterised as exclusively compensatory, or exclusively restitutionary; it combines elements of both”);

(iii) as compensatory, employing that characterisation in a perhaps extended or wider sense (see, for example, Bunnings at [174]; Stoke-on-Trent City Council v W. & J. Wass Ltd [1988] 1 WLR 1406 at 1416 (Stoke-on-Trent));

(iv) as not conforming “to the strictly compensatory measure of damage for the injured person's loss unless loss is given a strained and artificial meaning”: see Attorney-General v Blake [2000] UKHL 45; [2001] AC 268 at 279 (Blake); or

(v) as something of an anomaly (see, for example, Roberts at [27]–[28] per Barker J: “damages for wrongful use do not fit neatly with the compensation principle which governs the assessment of damages in most areas of tort law ... [they are] an anomalous measure of damages which rest upon an assumption that the plaintiff has incurred loss and the trespasser has incurred a profit as a result of the trespass”).

I am glad that the court expressed the various possibility thus: I can tell my students that it is not just them who faces difficulties. 

The court also provides a very useful "Summary of principles" from [128] - [138]:

First, an abiding feature of the case law concerning damages for mesne profits consequent upon a trespass to land, together with authorities in the analogous context of detinue, is that such damages are for the defendant’s actual use or usage of the plaintiff’s real or personal property.

That feature may be seen both in the historical emphasis on a trespassing defendant being required to give up “profits” derived from the trespasser’s use of the property, and also in the views of those judges and academics who have detected at least a restitutionary “flavour” to the action for damages for or by way of mesne profits.

It may also be seen in the fact that damages for or by way of mesne profits have only been awarded or have been limited by reference to the actual usage of the property: see Bunnings, Gaba and passages in the judgments of Denning LJ and Somervell LJ in Strand.

It is also consistent with judgments of the highest and most persuasive authority, including those of the Privy Council, the House of Lords, the English Court of Appeal, the Full Court of the Supreme Court of Western Australia and a relatively recent decision of this Court, namely Bunnings.

Secondly, in every case in which damages for or by way of mesne profits have been awarded, they are for the defendant’s use of the property in its existing state at the time of the commencement of the trespass. That is entirely logical as a matter of principle because that was the state the property was in when the interference with the plaintiff’s right to exclusive possession commenced, and the logic of the remedy is that the plaintiff was entirely out of possession of the property for the duration of the trespass and hence was in no position to change, alter, improve or develop the property.

Thirdly, whilst it is open to a plaintiff to claim damages for trespass by reference to any contractual rights associated with the property in question or indeed business opportunities which may have allowed the development of the property, such damages are only available for actual loss shown, on the balance of probabilities, to have been suffered.

Fourthly, the usual measure of damages for or by way of mesne profits will be the market rent for the premises or for the hire of the goods in their state during the period of the trespass. The calculation of that market rent must have regard to the particular context of the case and characteristics of the property or goods in question, as the variable rent calculated in Inverugie by reference to the holiday season illustrates.

Fifth, whilst the usual measure of damages for or by way of mesne profits will be the market rent for the premises in their state during the period of the trespass, there may be special circumstances associated with the defendant which warrant a departure from this yardstick. Any departure from this yardstick is not, however, at large, but again is tied or limited by the defendant’s actual usage of the property in question.

Sixthly, and in a similar vein, the market rent may be conceptualised or influenced by reference to the particular characteristics of the trespasser (see Ashman and Thompson) or the plaintiff (see, for example, Chep’s willingness in Bunnings to accept a lower rate of hire for a large customer such as Bunnings).

Seventhly, the particular circumstances of the parties and the property in question may be especially relevant in a case where there is no usual or standard market for the rental or hire of the property in question: see, for example, Roberts and Waugh.

Kind regards,

Katy

Katy Barnett | Professor

Melbourne Law School

Level 7, 185 Pelham Street, Carlton

The University of Melbourne, Victoria 3010 Australia

T: +61 3 9035 4699 E: k.barnett@unimelb.edu.au

 

SSRN | Twitter: @drkatybarnett | Blog: http://blogs.unimelb.edu.au/opinionsonhigh/

 

Just released: Barnett and Harder, Remedies in Australian Private Law (Cambridge University Press, 2018)