External Email

 

Where it would make a difference would be in situations involving the conflict of laws in the pre-Rome Convention* common law (which some very particular or old contracts could potentially still engage, and may well still be relevant in other commonwealth jurisdictions generally, although possibly not in Australia after Pfeiffer v Rogerson).

 

Take this example (the facts of which may well be somewhat loosely familiar):

 

John (famous director/producer) and Richard (world famous actor) enter into a contract for Richard to act in John’s upcoming West End production of Hamlet. It is governed by Ruritanian law (but no choice of jurisdiction). John incurs £1m of expenditure marketing Richard’s role as Hamlet. On the eve of the show Richard walks away, repudiating. He is served with English process at the airport the next morning, claiming for lost expenditure. No one can prove either way whether the play would have been successful or not.

 

The expert evidence at trial is agreed that Ruritanian law has very similar principles of contract to English law, including as to damages. However, its courts do not recognise any form of claim for reliance, whether as a substantive head of damages or a ‘fair wind’ presumption.

 

It seems to me the difference between the majority and minority in Cessnock would make a difference in a pre/non-Rome Regime world. If wasted expenditure is simply an evidential rule, then the English court would be able to apply it in quantifying the consequential loss under a Ruritanian contract (proof and quantification being for the lex fori: Credit Suisse v Vestia [2014] EWHC 3103 (Comm) at [264]; Boys v Chaplin [1971] AC 356). The claim should succeed (and I think this would be the answer an English court would give today).

 

However, if English law regarded it as a head of loss and not a matter of evidence , it is a substantive rule, and so the English court could not apply it because the lex contracts did not recognise the principle. The claim fails. The same would probably be true if Ruritanian law recognised wasted expenditure as a presumption, depending on how English law characterised the rule for conflicts purposes.

 

 

 

*Rome Convention/Rome I would largely preclude this, because it provides for all matters of quantifying damages, as well as presumptions/burdens, to be governed by the lex contractus, rather than lex fori.

 

Matthew Hoyle

Barrister

One Essex Court

 

This message is confidential and may be privileged. If you believe you have received it in error please delete it immediately and inform the sender immediately.

 

Regulated by the Bar Standards Board.

 

 

Rob, you get to the heart of the difficulty with Gageler CJ’s judgment when you say, “Without further reasoning, there is no justification for placing the plaintiff in the financial position they were once in in the past.” This is precisely the problem with his Honour’s formulation at [3].

 

As the plurality very correctly points out, US law is very different to Australian law in this regard. I can’t think of any case where it would make a difference (and I haven’t got the excuse of it being morning) but I think it creates unnecessary confusion to take such an approach.

 

I must confess that I still had to make a matrix where I ticked off what the judges agreed on and disagreed on—it seems that this is the way of Australian wasted expenditure cases?—but yes, it’s less difficult than Amann to parse. And that’s a relief. 

 

Finally, I am a fan of the “fair winds” principle too. (Now I’m imagining a little fan pushing along a boat).

 

All the best, 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)

 

On 8 May 2024, at 4:09 PM, Robert Stevens <robert.stevens@law.ox.ac.uk> wrote:



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

 

 

From: Adam Kramer KC <akramer@3vb.com>
Sent: Wednesday, May 8, 2024 6:40 AM
To: Katy Barnett <k.barnett@unimelb.edu.au>; Neil Foster <neil.foster@newcastle.edu.au>
Cc: obligations@uwo.ca
Subject: Re: ODG: HCA on "wasted expenditure" damages in contract law

 

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

 

Adam Kramer KC Barrister​​​​ <~WRD0000.jpg>   3 Verulam Buildings Gray's Inn, London WC1R 5NT T:  +44 (0)20 7831 8441 3vb.com <~WRD0000.jpg>   <~WRD0000.jpg>   <~WRD0000.jpg> <~WRD0000.jpg> <~WRD0000.jpg> <~WRD0000.jpg> <~WRD0000.jpg> 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.

From: Katy Barnett <k.barnett@unimelb.edu.au>
Date: Wednesday, 8 May 2024 at 05:44
To: Neil Foster <neil.foster@newcastle.edu.au>
Cc: obligations@uwo.ca <obligations@uwo.ca>
Subject: Re: ODG: HCA on "wasted expenditure" damages in contract law

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.

 

All the best,

 

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)

 

On 8 May 2024, at 12:14 PM, Neil Foster <neil.foster@newcastle.edu.au> wrote:



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

 

 

NEIL FOSTER

Associate Professor, Newcastle School of Law and Justice

College of Human and Social Futures

 

T: +61 2 49217430

E: neil.foster@newcastle.edu.au

 

Further details: http://www.newcastle.edu.au/profile/neil-foster

My publications: http://works.bepress.com/neil_foster/ , http://ssrn.com/author=504828 

Blog: https://lawandreligionaustralia.blog

 

 

The University of Newcastle
Hunter St & Auckland St, Newcastle NSW 2300

<image001.png>

 

Top 200 University in the world by QS World University Rankings 2021

I acknowledge the Traditional Custodians of the land in which the University resides and pay my respect to Elders past, present and emerging. 
I extend this acknowledgement to the Worimi and Awabakal people of the land in which the Newcastle City campus resides and which I work.

CRICOS Provider 00109J

 

 

Disclaimer

The information contained in this communication from the sender is confidential. It is intended solely for use by the recipient and others authorized to receive it. If you are not the recipient, you are hereby notified that any disclosure, copying, distribution or taking action in relation of the contents of this information is strictly prohibited and may be unlawful.

This email has been scanned for viruses and malware, and may have been automatically archived by Mimecast, a leader in email security and cyber resilience. Mimecast integrates email defenses with brand protection, security awareness training, web security, compliance and other essential capabilities. Mimecast helps protect large and small organizations from malicious activity, human error and technology failure; and to lead the movement toward building a more resilient world. To find out more, visit our website.