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Week 9 Common Law Remedies (Damages are the quintessential common law…

- - - - The burden of proof for these things falls upon the plaintiff.
      - The plaintiff must show that there was a breach at law, and the plaintiff must show what losses were suffered as a result of that breach.
      - It follows, of course, that damages can only be awarded if a breach is established, and if the plaintiff is able to show a loss.
  - - - Commonwealth v Amann Aviation (1991) 174 CLR 64
      - Radford v De Froberville [1977] 1 WLR 1262
        De Froberville purchased a house adjoining the block of flats owned by Radford. As part of the purchase, she covenanted (i.e. promised) to erect a very substantial wall on the boundary between the properties. She failed to do so, and Radford sued for damages. De Froberville, however, argued that no damage had been suffered. The court found that Radford should receive damages sufficient to cover the cost of building the wall himself.
        Let’s think about this. When did the breach occur? Effectively, the breach occurred when De Froberville failed to build the wall. Radford’s efforts to build the wall himself came afterwards. The cost of the building materials etc may have fluctuated in the meanwhile – however the court found that in these circumstances, the proper date of assessment related to when the new wall was built, not when the breach occurred.
        
        Example of a case where the date may be assessed not when the breach occurred - rare situation
    - - Exceptions
        
        If there is more than one cause of action.
        OK, this isn’t really an exception, I guess. It makes sense that if there are two causes of action, then the resolution of the first cause of action doesn’t stop the plaintiff from proceeding with the second.
        
        If there is a continuing breach.
        Sometimes, a contract may require a definite act be done within the time allowed. If a warranty in that contract is breached, there will be an entitlement to damages, but the contract is not terminable; if a condition is breached this will give rise to both a right to terminate and seek damages.
        
        Larking v Great Western (Nepean) Gravel (1940) 64 CLR 221
        Larking gave the company the right to extract gravel from part of the Nepean river bed (a profit a prendre contract). As part of the deal, the company was to (a) erect some fences and gates, and (b) maintain them in good order. Failure to do so gave rise to the right to terminate (condition). The respondent did not erect the fences or gate. After the respondent went into liquidation the appellant sought to terminate and reclaim possession. The contract eventually came before the courts. One question was whether the breach – failing to erect the fences and gate – was a once-and-for-all breach, or a continuing breach. The court found that the breach was a once-and-for-all breach, not a continuing breach. Given that the plaintiff had accepted royalties after the breach occurred, the appellant had lost the opportunity to terminate the contract.
        Here, the distinction between types of breach was not too difficult: the duty to erect the fences and gate was in the nature of “an act of solitary performance” (per Rich ACJ, 228) even though a particular date was not contractually specified (as opposed to the obligation to maintain same, which would likely be considered a continuing breach).
  - - - If it does not – if the liquidated damages are obviously higher than the likely actual losses – then the liquidated damages will be regarded as a penalty
        If a liquidated damages clause has the effect of penalising the defaulter, of imposing consequences which quite obviously exceed the potential harm, then the liquidated damages clause will be void. It will still, under those circumstances, be open to the innocent party to seek common law damages.
      - Dunlop Pneumatic Tyre Co v New Garage & Motor Co [1915] AC 79
        Dunlop supplied tyres, tyre tubes and tyre covers to New Garage, which then sold them on to consumers. Part of the contract specified that there was a minimum price for each article, and that New Garage was not able to sell Dunlop’s products for less than that minimum price (a practice that would now be prohibited in Australia by the Competition and Consumer Act 2010 (Cth) as “resale price maintenance”). The contract included a liquidated damages clause which imposed damages of five pounds per item sold below the minimum cost. Controlling for inflation and currency conversion, that amounts to approximately the equivalent of $900 Australian per unit.
        New Garage, as you may have guessed, sold Dunlop products without adhering to the price-maintenance part of the contract. Dunlop sued to enforce the liquidated damages clause, and it came before the courts. So, what do you say? Was this liquidated damages, or was it a penalty?
        The court found that this was liquidated damages, not a penalty.
  - - - Lord Reid set out the test, in his judgment, which has since been used in Australian cases:
        The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation.
        So, if a reasonable person could foresee the loss of expectation at the time the contract was formed, the expectation loss will most likely be compensable.
- - - - two limbs
        
        • Second, the defendant should be liable for damage such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.
        
        This second limb requires a little unpacking. For the damage to reasonably be in the contemplation of both parties, then one of two things must occur:
        • Either the plaintiff must tell the defendant the special knowledge required to foresee the loss; or
        • The plaintiff must know that the defendant has learned the special knowledge from some other source.
        
        • First, the defendant should be liable for damage which occurs “naturally … according to the usual course of things.” This damage is the direct and immediate damage which is clearly and demonstrably linked to the breach.
    - - Baltic Shipping Co v Dillon (1992) 176 CLR 344
        In this case, Baltic Shipping contracted with Mrs Dillon to provide her with a 14 day cruise, and the ship sank on the tenth day.
        Mrs Dillon successfully argued that the whole purpose of the contract had been to provide her with pleasure. This was a pleasure cruise – not, for instance, a mere contract for transportation – and the company failed to provide her with the contracted pleasure, because she found herself aboard a sinking ship! On its face this seems pretty reasonable. You should be aware, however, that circumstances such as these are quite rare, and unless it is fairly obvious that a contract was for pleasure, don’t be too hasty about arguing that a plaintiff should be compensated for nonfinancial loss.
  - - - Bellgrove v Eldridge (1954) 90 CLR 613.
        In this case, Bellgrove was a builder, who contracted to build a house. Once building of the house was well underway it was discovered that the concrete used for both the foundations and the bricklaying was seriously deficient in cement. The result was that both the foundations and the walls themselves were unsafe. Eldridge wished to have the house demolished and reconstructed; Bellgrove argued that some form of underpinning, or replacement of the foundations would be adequate.
        The court found that the most appropriate solution in this situation was to have the house demolished and rebuilt.
        The defaulting party, Bellgrove, was therefore liable to pay all of the costs associated with demolition, and with the rebuilding of the new structure.
    - - Banco de Portugal v Waterlow & Sons [1932] AC 452
        The Banco de Portugal was the central bank of Portugal, responsible for the issue of banknotes. They decided to release a new banknote worth 500 escudo featuring explorer Vasco da Gama, so they made a contract with Waterlow & Sons, printers, to print 600,000 of the banknotes.
        A syndicate of criminals sent a representative to Waterlow & Sons. The criminal representative convinced Waterlow he was also a credentialed representative of the Banco de Portugal, and he placed an order for a further 580,000 of the notes.
        
        They argued that the expenditure made by the bank in honouring the counterfeit notes was the bank’s own decision. The court disagreed. The bank’s decision to honour all of the notes was a reasonable mitigating measure. If the bank had attempted to honour none of the notes, this would have utterly undermined confidence in the economy, with disastrous results. As a result, the measures taken by the bank were reasonable mitigating measures, and Waterlow & Sons had to foot the entire bill – over £600,000.
- - - - The other party can, of course, sue on the basis that the rescission was wrongful. If they win, the court will hold that the party that wrongfully rescinded the contract has in fact repudiated the contract – and they will be liable for damages!
        Consequently, rescission is only a good idea if one is absolutely sure that it is justified.
  - - - First, specific performance is unlikely to be granted if the obligation is not sufficiently clearly spelt out in the contract. That makes sense: the court must be certain about what it is requiring the party to specifically perform
      - Second, the court may not require specific performance if this in turn would require the ongoing supervision of the court. This is held to especially apply to contracts for “personal services” where performance would be ongoing for some period of time.
  - - - test for the application of interlocutory injunctions
        
        • Second, the court must be satisfied that there is a serious question to be tried. This does not mean the court must be satisfied that the plaintiff will win; rather, the court must be satisfied that the plaintiff has at least a prima facie case
        
        • Third, the interim relief must be justified, taking into account the potential future harm, and the limits upon the defendant if the injunction is granted (this is called the balance of convenience).
        
        • First, the application of equity must be appropriate. So, the plaintiff must show that damages would not be an appropriate remedy in the ultimate case
        
        Castlemaine Tooheys v South Australia (1986) 161 CLR 148,
        In this case, South Australia had amended its legislative scheme for the recycling of bottles, to impose much higher penalties. Castlemaine Tooheys sought an injunction to prevent South Australia from prosecuting under the new provisions, while a constitutional question (relating to tariffs on interstate trade) was tried
        In this case damages were not available, so the first question was disposed of. The court was satisfied that there was a serious question to be tried. However, balancing the danger to the environment of littered bottles against the plaintiff’s interests in avoiding prosecution, the court found that the balance of convenience did not favour the plaintiff. The injunction was not granted