Torts Flashcards
Clark v Macourt
General Principles AND Mitigation
1. Facts
a. C was a fertility practitioner, entered into a $386,950.91 agreement with M to purchase assets, including 3513 “straws” of donor sperm
b. Only 504 straws turned out to be useful, C had to source 1996 straws elsewhere
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Why WAS C entitled to $1.2m for the breach of contract - Hayne J
a. Rejects the reliance approach for contractual breach damages
b. Damages for breach of contract should be assessed on the basis of the expectation loss - loss of the value of what the promisee would have received
c. C should have gotten 1996 more straws than she did (Based on average number of usable straws), totaling about $1.2m at the time of breach
d. How much C paid for the straws is irrelevant, and her subsequent sourcing of straws left her neither better nor worse off, so this is also irrelevant -
Gageler J’s dissent on approach
a. Believes no damages should be awarded here
b. Thought that the sperm straws were not marketable - its only use seemed to be for patient treatment, and supply would relieve C of the need to source elsewhere
c. Valued the straws based on their value to C in terms of what she intended to use the straws for - restoring C to the same position as if the contract had been performed given her expected use of the straws
d. Thought that C could only get damages if she showed she could not recoup the higher price she had to pay for the secondary sourcing
e. Seems to take the expectation approach but this has elements of reliance!
Mitigation:
1. Facts
a. C was a fertility practitioner, entered into a $386,950.91 agreement with M to purchase assets, including 3513 “straws” of donor sperm
b. Only 504 straws turned out to be useful, C had to source 1996 straws elsewhere
**2. Why did the purchase of substitute straws NOT reduce damages? - Hayne J **
a. All the purchase did was reveal the market value of C’s loss, by revealing the value of what she was owed but did not received
b. C was not mitigating expectation loss
c. The purchase of subsequent straws left C neither better nor worse off - they simply replaced what the vendor had agreed to supply
d. The repurchase would have only been more relevant had C obtained some advantage from their use or been left worse off than she already was
Moore v Scenic Tours
General Principles
Bellgrove v Eldridge
1. Facts
a. B entered into a contract with E to build a house
b. E failed to make the final payment
c. B sued for payment but E counterclaimed by arguing that the house was poorly constructed and hence worthless
2. Why WERE rectification damages awarded here? - Full Court (Dixon CJ, Webb and Taylor JJ)
a. General approach for goods is the market value, but here one should look to the cost of rectifying the damage to have a house that accords with the agreement (‘Conformity with the contract’)
b. The loss here was the failure to have a building erected upon E’s land in accordance with the contract, plan and specifications - can’t really be compensated through diminution in value
c. Immaterial whether or not E will actually rectify the damage (CF Ruxley)
d. Rectifying work must be reasonable in the circumstances e.g. not worth tearing down a building built with new bricks to replace them with second-hand ones - we don’t want economic waste
e. Demolition and re-erection is reasonable where defective foundations threaten the stability of a house and this is the only way to rectify the threat
Tabcorp
Rectification Damages
1. Facts
a. T leased office premises from B, agreement had a covenant forbidding T from altering the premises without prior written approval
b. T made significant structural alternations to the foyer, which B had taken particular care over previously - also caused loss of rent during restoration
2. Why WAS B entitled to rectification of $1.38m despite the diminution of value being only $34,280? - Full Court (French CJ, Gummow, Heydon, Crennan and Kiefel JJ)
a. Note - damages included compensation for loss of rent!
b. The key loss here was the loss of B’s entitlement to the preservation of the foyer without unconsented alterations - rectification would restore the foyer to the state it was in pre-damage
c. Non-commercial as the provision was arguably not related to commercial ends
d. Where, as here, the contract is not for the sale of marketable commodities, diminution in value approaches don’t fully restore the innocent party
e. Unreasonable when technical breaches used to secure uncovenanted profits
f. Suggests that the facts of Ruxley are quite different form those here and as such rectification would not be unreasonable
g. Suggested T may have benefitted from making a betterment discount argument to decrease damages payable - T’s actions reduced need for future refurbishment
Ruxley Electronics
Rectification Damages/Damages for disappointment and distress
1. Facts
a. A pool was constructed but ended up being slightly too shallow
b. The pool was still safe to dive into and the depth difference didn’t change value
c. The only way to change the depth would be to demolish the pool and rebuild it
**2. Why were rectification damages NOT awarded? - House of Lords **
a. It was unreasonable to seek rectification - rectifying the loss would require a costly rebuilding which was ‘wholly disproportionate’ to the disadvantage suffered
b. Seemed to place some importance on the fact that they thought the claimant did not actually intend to rebuild the pool (Cf Australian approach)
c. The contractual objective had been substantially achieved (per Lord Jauncey)
DISAPPOINTMENT
1. Facts
a. A pool was constructed but ended up being slightly too shallow
b. The pool was still safe to dive into and the depth difference didn’t change value
c. The only way to change the depth would be to demolish the pool and rebuild it
**2. Why was the plaintiff awarded a £2500 amenity fee? - House of Lords **
a. The House of Lords thought it to be “fair” to award the plaintiff some modest non-pecuniary sum for his disappointed expectations
b. Accepted by the NSW Court of Appeal in Coshott v Fewings Joinery Pty Ltd (Pre-Tabcorp)
c. HCA in Tabcorp seemed to cast doubt on this, calling it ‘inconsistent’ with established principles, but did not conclusively decide
Stone v Chappel
Rectification Damages
McRae v Commonwealth Disposals
Reliance Damages
1. Facts
a. C sold M an oil tanker that was supposedly lying on a reef underwater
b. C spent 10x the purchase price in fitting out a salvage expedition, but vessel sank on the way to the tanker’s ‘location’
c. Subsequently found out that the tanker did not exist, and C sought damages
2. Why WERE reliance damages (partly) allowed? - Dixon and Fullagar JJ
a. C did not contract to deliver a tanker of any particular size, value or condition - without anything else this would be only a failure to deliver a stranded tanker (meaning only nominal damages)
b. No damages for the sinking of the ship - not related to the agreement
c. Impossible to value a non-existent thing (the tanker)
d. Damages assessed by reference to expenditure relying on C’s promise
e. The reconditioning of the boat and equipment purchases would have been done anyway - not in reliance on the contract and hence not recoverable
i. The boat was already being refitted at the time of contract, but the plan of refitting was modified after entry into the agreement
f. It was reasonable for M to assume the tanker existed and expend accordingly
g. Comments on each of the ‘heads’ of wasted expenditure
i. Equipment - Rejected as some of the items were ordinary necessities of a ship (e.g. lights) but wholly rejected as all cap ex was claimed
ii. Reconditioning - Rejected as 1/3 of it was done before the contract
iii. Loss of revenue that could have been generated elsewhere - Allowed but significantly reduced (the ship was idle for a while)
iv. Travelling expenses - Allowed
v. Ship’s stores - Allowed but discounted what went down with the ship
vi. Special expenses of the expert salvager - Allowed
vii. Crew’s wages - Allowed
viii. Claims by crew for lost property - Rejected, C not responsible for loss
ix. Insurance premiums - Rejected, insurance is an ordinary incidence
x. Office expenses - Allowed
Commonwealth v Amann Aviation
Reliance Damages
1. Facts
a. C wrongfully repudiated a contract with A to provide a surveillance service
b. Concern was placed on the fact that C may have lawfully terminated the agereement or may not have renewed it on expiry
- Why WAS A able to get reliance damages? - Mason CJ and Dawson J
a. Affirms that plaintiffs are more likely to make reliance based claims in cases where they have not suffered a loss of profit or where it is impossible/uncertain to assess what the outcome would have been had performance occurred
b. There is a prima facie presumption that parties do not enter into contracts they cannot recover costs for
c. Unlike McRae it was not impossible to quantify profits - instead it was highly problematic to value the prospect of both renewal and termination
d. The contract was one in which the contract could recoup part of its expenditure during the original contract and then secure renewal and further profits through subsequent agreements
e. Parties clearly contemplated the loss of the commercial benefit of renewal if C breached the contract
f. Mere existence of a right to terminate does not automatically restrict damages
g. As it benefitted both parties, it is likely there would have been a strong chance of renewal had the agreement run its course
h. Essay - Is it not a bit weird that Mason and Dawson said loss of profits were difficult to calculate but then conclude the contract would have been renewed? - Deane J (Dissent) - Reduces damages due to uncertainty of termination/renewal
a. Suggests reliance measures may be used where it is unconscionable for the breaching party to keep the excess money paid over consideration
b. Presumption of profit is not displaced by the fact that the benefit included some ‘remote’ benefit that may not be achieved, or that the other benefit may not be valuable in monetary terms
c. A was in breach at the time that C breached so technically C could validly cancel
d. A significant part of A’s ‘commercial advantage’ was the renewal of the contract, Deane has troubles with placing a monetary value on this
i. Hard to do more than speculate about the chances of this arising
ii. Also can only speculate about the economic benefits
e. Because of this discounts damages by 20%
Baltic Shipping v Dillon
Damages for Distress
1. Facts
a. D took a cruise on a ship
b. Through B’s negligent navigation the ship sank, causing D to lose her luggage which included letters from her recently deceased husband
c. D also suffered injuries (but not the focus here)
**2. Why WAS D awarded distress damages? - Mason CJ **
a. Generally distress damages are not available as anxiety and injured feelings do not form part of the compensable loss flowing from breach of contract
b. Disappointment/distress are generally not significant enough to warrant damages
c. Distress damages generally confined to cases of physical inconvenience caused by the breach or where the object of the contract is to provide enjoyment, relaxation or freedom from molestation
d. See above for exceptions to the general rule
e. Where the object of the contract is to provide enjoyment, relaxation or freedom from molestation, as was the case here, distress damages flow directly from the breach of contract
f. The contract here was for a “pleasure cruise” and hence was to provide for enjoyment and relaxation
g. Suggests that disappointment and distress damages may be awarded if they fall within Hadley v Baxendale remoteness (But does not seem to be the focus)
**3. Deane and Dawson JJ **
a. Citing Kirby P in the NSW Court of Appeal, thought that the rule being different to that in tort was a result of history, rather than logic, but did not want it to be abolished judicially
Brennan J
b. Raised the idea of loss of reputation allowing for distress damages
c. Essay - No approximate estimate of liability between parties can be formed if subjective mental reactions to breach were added on as further damage without proof of pecuniary loss - would lead to likely indefinite liability, inhibiting making of commercial contracts
**4. McHugh J **
a. Suggested future reform to the rules may be desirable, and if so it would likely fall under the principle of remoteness (and note that Mason CJ does discuss Hadley v Baxendale)
Alexander v Cambridge Credit
Causation
March v Stramare
Causation
Hadley v Baxendale
Remoteness
1. Facts
a. P’s crankshaft for his flour mill’s steam engine broke
b. D undertook to deliver the shaft to serve as a model for a replacement one
c. The delivery was delayed due to the D’s neglect - this meant the mill was idle and a substantial loss of profits was endured
**2. Why were damages DENIED here? - Alderson B **
a. Outlines the two limbed test (see above)
b. If special circumstances of the contract were communicated from P to D, damages could be awarded for injury resulting from those special circumstances
c. If they are not communicated the D could at the very most be taken to assume injuries that could arise generally
d. The need for urgent delivery was not communicated by the P, and as such the loss of profits cannot reasonably be contemplated by both the parties in making the contract - would not have flowed naturally from the breach of the contract
i. E.g. the Ps may have had another crankshaft and were this the case the delay wouldn’t have had a huge effect
Victoria Laundry v Newman Industries
Remoteness
1. Facts
a. V purchased a boiler for use in their laundry business, telling N that they needed it as soon as possible
b. Boiler was delayed by 5 months due to a defect needing to be repaired
c. V lost their normal business and some lucrative government contracts
2. Why were damages PARTIALLY allowed?
a. Allowed first limb Hadley damages for the profits lost in the ordinary course
b. Held that the government contracts were too remote, would only be recoverable under second limb Hadley if N had known of the prospects/terms of the contracts at the time of agreement
i. This may be an error - both losses should likely be stated generally
Transfield Shipping (The Achilleas)
Remoteness
1. Facts
a. M let the Achilleas to T
b. Before re-delivery charter rates had spiked so M fixed the ship for a follow-on charter at a high rate
c. T returned the ship late, and as such M had to accept a much lower rate for the follow-on charter
**2. Why were damages for the follow-on charter NOT awarded? - Lord Hoffman **
a. Believes that liability for damages should be founded upon the objectively ascertained intentions of the parties
b. All contractual liability is voluntarily undertaken, and the greater the risks assumed by a party the greater the premium will be
c. With consideration to the contracting background of the market expectations, holds that T would not have assumed responsibility for the loss of profit from the subsequent charter
Burns v MAN Automative
Mitigation
1. Facts
a. B entered into a hire-purchase agreement for a prime mover supplied by M
b. M warranted that the engine was fully reconditioned - it was not
c. B learnt the engine wasn’t as described and sought damages
d. Notably B could have had the engine reconditioned but this would cost a prohibitive amount given his circumstances
**2. Why could B NOT recover damages - Gibbs CJ, Wilson, Deane and Dawson JJ **
a. The reasonable step to mitigate loss here was to get the truck reconditioned
b. Held that B’s impecuniosity was not relevant to assessing reasonableness
**3. Brennan J’s dissent as to financial means **
a. It would be radically unfair to ask an illiquid plaintiff to pay thousands of dollars
b. Even if you accept that impecuniosity should not be considered, it shouldn’t apply here - B cannot afford to take the relevant steps because of M’s wrong
i. The only reason B is carrying out a loss making venture is because of the unfitness of the vehicle
