|
External email: Please
exercise caution
|
Like Katy, I think
the plurality (and Gordon J who is very similar) have the better of it. The
second case recently when Gageler CJ has adopted the position of the US
Restatement, whilst the majority has (rightly) rejected it. I am not sure
whether the different approaches would ever give a different result in practice
(can someone more awake than I am think of an example?)
Gageler CJ states
that wasted expenditure “is itself a category of damage” ([9]), because the
defendant is “worse off” ([12]), see also Jagot J at [190]
I do not think that
is correct. When we assess whether the plaintiff is “worse off” we need to
compare the position today with another baseline. They may certainly be said to
be “worse off” than they were before they started performing. So, comparing the
world as it is now, with the world as it once was before they started work,
they’re definitely worse off. And when we use loss as a verb in everyday
English (“I have lost my reading glasses”) that is the comparator we employ.
But without further
reasoning, there is no justification for placing the plaintiff in the financial
position they were once in in the past. All damages seek to place the plaintiff
in the position they would have been in if the wrong had not occurred. Where
the wrong is a breach of contract, that is the position the plaintiff would
have been in if the breach had not occurred, which is the position they would
have been in if the defendant had performed. Normatively, that is because the
reasons for the duty breached justify the defendant now being under a next-best
duty of that form. Our comparators are the world as it is and the hypothetical
world that would have existed if the wrong had not occurred.
Gageler CJ and
Jagot J both state that their starting position that reliance expenditure is
recoverable just because it is a relevant head of loss, is then limited by the
Robinson v Harman rule that you cannot be placed in a better position than you
would have been if the contract had been performed. But neither articulate any
reason why that is so, they just assert it as a limiting principle.
For the majority
(and I think we can lump Gordon J in with the plurality) the problem is why the
plaintiff is able to opt to claim their wasted expenditure at all. They adopt
Kramer’s helpful explanation that we give the plaintiff a fair wind assumption that
he would have recovered that expenditure, the difficulty of proving that they
would have done so having been created by the defendant’s breach. Where the
defendant can show that the expenditure would not have been made good, it is
not recoverable.
Three further
thoughts.
First it is
irritating that the judgments don’t engage with one another, so that we have to
work out for ourselves what the points of disagreement are. The same problem
has long been true of trying to make sense of Commonwealth v Amann and you’d
hope they’d be a bit more generous to the future.
Second Australian
contract lawyers no longer need to struggle through hundreds of pages of judges
saying slightly different things in Amann in order to work out the law.
Third, and more
substantively, under Planche v Colburn, a plaintiff should be able to recover
the value of the work they’d done prior to the defendant’s repudiation of the
contract (quantum meruit). Such a claim has the advantage that there is no
reasonableness requirement but the disadvantage that all that is recoverable is
the performance necessary under the contract, not any “incidental” expenditure.
I expect Fuller & Perdue’s confusion comes from that separate rule.
R
Great summary Katy.
I’ve only been able to skim so far (did they really need this many separate
judgments?) but I agree with your summary. In short, all but Gageler CJ adopt
the orthodox approach that reliance loss in Australia and England (but not the
US) is not a separate head of damage but all about a presumption facilitating
proof of expectation loss (e.g. lost revenue) where there is uncertainty as to
what would have happened. The majority does not agree with Gageler that the
Soteria case in the English C of A (which I lost and did not get permission
from the Supreme Court on. Aargh!) says anything contrary to this, or that
causing expenditure that would have been incurred anyway to be ‘thrown away’
(Gageler at 12) is a form of loss of its own separate from the lost recoupment
in any way. So this is the new leading summary on the wasted expenditure
summary. Time to edit all your contract reading lists! Adam
|
|
|
|
|
3 Verulam Buildings
Gray's Inn, London WC1R 5NT
|
|
|
|
|
|
|
|
|
|
|
|
Confidentiality Notice
|
|
The contents of this email are
CONFIDENTIAL and may be PRIVILEGED. If you are not the intended recipient,
please telephone (020) 7831 8441 and delete this email.
Barristers regulated by the Bar
Standards Board.
|
|
Data protection notice
|
|
3 Verulam Buildings, 3VB Services Limited and Chambers'
members and associate members collect, store and use personal data
consisting of contact details for persons with whom they correspond, data
relating to clients and other persons connected with instructions to
perform legal services and engagements as arbitrator or mediator, data
relating to marketing, recruitment, procurement of goods and services, and
data relating to other matters. They are required by the General Data
Protection Regulation and/or the Data Protection Act 2018 to provide
information about personal data which concerns data subjects. For further
details of the types of personal data, the purposes for which the data are
held, the persons with whom the data may be shared, the period for which
data are held, your rights as a data subject, and other matters, click here.
Contact details for communications relating data protection: dataprotection@3vb.com (for
emails); 3 Verulam Buildings, Gray's Inn, London, WC1R 5NT, England, Ref
Data Protection (for postal communications); Chambers Director at +44 (0)20
7831 8441 (for telephone communications).
If you have been sent a marketing email and you wish to unsubscribe from
receiving such emails click here.
|
|
Thanks so much for this summary, Neil. I’ve just been
through the judgment and tried to work out how the judges agree or disagree.
(1) There is a fundamental disagreement between Gageler CJ
on the one hand and the plurality and Gordon J on the other about whether
damages for wasted expenditure are a separate head. Gageler CJ says that they
are (while disclaiming the possibility that he’s going as far as Fuller and
Purdue), whereas the plurality and Gordon J say that they are not. Jagot J also
seems to infer that they’re not.
(2) The plurality characterises this kind of loss as a
“consequential loss”. Although it’s not directly stated, I suspect this is a
distinction which rests upon the idea that direct losses are substitutionary,
and consequential losses reflect the actual loss and are subject to limitations
such as causation and remoteness and so forth. Conversely, Gageler J seems to
me to implicitly reject a substitutionary account of contract damages at [7].
Neither Gordon J nor Jagot J in their separate judgments consider this point.
(3) The court unanimously affirms the position in Amann
Aviation that the plaintiff cannot elect between expectation and “reliance”
measures.
(4) There is some disagreement on the nature of the
principle: is it an evidentiary presumption or not? Gageler J seems to reject
this, but the other judges see it as an evidentiary presumption. They do agree
that it’s unnecessary for a plaintiff to prove incontrovertibly that the
expenditure would have been recouped.
(5) There is some divergence around the question of whether
it’s necessary for a plaintiff to show that it is difficult to recover on
another basis for wasted expenditure to be recovered. The plurality and Gordon
J say that impossibility or difficulty are relevant, whereas Gageler CJ and
Jagot J say that it is unnecessary.
(6) The court unanimously rejects the distinction made in
Fuller and Purdue’s article about the reliance interest between “essential
reliance” and “incidental reliance.”
(7) The plurality seems to doubt the application of the
remoteness rules in Hadley v Baxendale as a limit on recovery in these
cases, whereas the other judges confirm it provides a limit.
(8) All judges apart from Gageler CJ say that principles of
reasonableness, or a notion of expenses being reasonably incurred, is necessary
before wasted expenditure can be recovered.
(9) All judges agree that there is an onus on the defendant
to prove that the expenditure would not have been recouped by the plaintiff,
and a mere possibility that it would not have been recouped is not enough.
(10) The plurality develops a more general “fair winds”
principle in private law, drawing on Adam Kramer’s work, which is said to arise
when losses are uncertain and the evidentiary difficulties arise as a result of
the defendant’s conduct. [And yes, I love Armoury v Delamirie too.]
Conversely, Gageler J and Gordon J both reject a more general principle.
Gageler CJ is the outlier in this decision, although he
comes to the same conclusion as the others. I am a fan of Gordon J’s judgment—I
found it clear and helpful—but that may also reflect my own biases in terms of
how I see these cases.
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 | Postal address: Level 2, Melbourne Law School
Barnett and Gans, Guilty Pigs: the
weird and wonderful history of animal law (Latrobe University
Press, 2022)
Barnett, Damages
for Breach of Contract (Sweet & Maxwell, 2022)
Out now! Barnett, Yin and Allcock, Remedies
Cases and Materials in Australian Private Law (Cambridge
University Press, 2023)
to accompany Barnett and Harder, Remedies
in Australian Private Law (Cambridge University Press, 2018)
Dear Colleagues;
This is not my area but just
thought I would note that the High Court of Australia has handed down its
decision today in Cessnock
City Council v 123 259 932 Pty Ltd [2024] HCA 17 (8 May 2024). ODG
colleagues Katy Bamett, Adam Kramer and David Winterton are cited and will no
doubt be able to explain the significance of the case better than I can.
But in brief, Cessnock
Council entered into a contract with the respondent company (then called “Cutty
Sark”) to give development approval to allow construction and use of a facility
near the local airport. In reliance on the promise, the respondent spent some
$3 million on the building. The Council breached its promise by not doing what
needed to be done for development approval. The respondent sued for breach of
contract- it was hard to prove whether they would have made a profit from the
business even if approval had been given. But the NSWCA, and here this 7 member
bench of the HC, held that they could recover damages based on the wasted
expenditure.
There was one “plurality”
judgment (EDELMAN, STEWARD, GLEESON AND BEECH-JONES JJ), and three other
separate judgements from Gageler CJ, Gordon J and Jagot J. There seems to have
been a difference of approach to the way the question should be answered between
the plurality and the CJ, but to be frank on a first reading I am not across
the debates sufficiently to identify the difference. I think the difference can
be seen in comparing the approach of Gageler CJ at para [3] with the plurality
judgement at para [118]. But I leave further comment to other colleagues.
I will say that it was nice
to see a reference to one my favourite tort cases, Armory v Delamirie,
at [130] in the plurality judgment!
Regards
Neil